You need to effectively manage your cash flow, especially if you are a startup business. You might be able to sell more on Amazon, but if you don’t tend to your cash flow properly, you will see your business waning.
Managing your financial resources toward profitability will make your business healthier and more robust. As you seek to increase Amazon sales, here are some tips for governing cash flow:
- Determine your breakeven point – Knowing the point where your business will become profitable will motivate you to keep striving. If your business is not making a profit and your cash flow is negative, you know you are headed for some serious problems. Handle your capital with the goal of making profits.
- Focus on cash flow management, not profits – Going beyond your breakeven point and becoming profitable while still managing your cash flow means that you have reached a higher stage in the life of your business. Need help? There are cash flow templates available online which you can use to keep track of how your cash moves.
- Maintain some cash reserves – Having cash shortfalls is inevitable in any business. Your survival will depend largely on how you wiggle out of the shortfall. Having emergency money in the bank is an insurance against cash shortages.
- Collect receivables ASAP – Keep term payments to a minimum. Assign a trustworthy member of your team to follow up with delinquent customers. Any delay in collection will result in a cash lapse, jeopardizing the function of your business.
- Encourage customers to pay up faster – You can achieve this by offering discounts to customers who pay early. Limit giving credits to reliable and proven customers only.
- Extend payables as long as possible – While you encourage your customers to pay early, try to extend your own payables. This will give you a buffer when some customers are late on their payments.
- Use technology to your advantage – Use the latest software to manage your cash reserves. Keep your spreadsheets in the cloud to allow you instant access to the pulse of your finances, wherever you are.
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