Your cash management practices determine if your business will thrive or become insolvent. Statistics show that 82% of small businesses failure results from cash flow mismanagement.
You need enough working capital to fund your daily operations and finance your business’ growth needs. However, if you are not careful about spending your working capital, you may lack the cash needed for short-term and long-term expenditures, leading to insolvency. Here are tips to managing working capital to ensure your business thrives:
Train Your Employees on Cash Flow Management
Cash flow management is not a preserve of the finance department. Train all your employees to understand their role in maintaining a good cash flow. In addition, develop key performance indicators (KPIs) to monitor cash flow in your company.
Ensure everybody understands these KPIs. Use the data you generate from your cash flow monitoring tools to take remedial actions for better working capital management.
Small expenses can build up significantly and affect the working capital for your business. Control expenditures by introducing expenditure monitoring systems, such as a corporate card, to understand where your cash is going.
Identify unnecessary expenditures like travel and entertainment and reduce or eliminate them. Take remedial action on workers flouting cash management rules.