Struggling with Money? This is How to Manage Cash Flow Effectively
How to manage cash flow effectively is something that needs to be understood to help make financial decisions. You can also avoid unnecessary debt and be better prepared for emergencies and all the unexpected things. Here are some important ways to manage cash flow for personal and business purposes.
7 Tips on How to Manage Cash Flow Effectively
- Record All Income and Expenses
In managing good and correct cash flow, start by recording all income and expenses as a routine. This is an important start so you know where the money comes in and goes out for what. When you have detailed records and do this habit in the long term, management will be more organized.
You don’t always have to record everything manually by writing it down in a book or paper. Now there’s a more efficient way such as using a financial application that can be downloaded on your smartphone. However, in order to get records that can help manage money, do it consistently and with discipline.
- Create a Monthly Budget
If you already have a record of all your income and expenses, it’ll be easier to create a monthly budget. Cash flow management will be easier with a monthly budget so that there are limits given to yourself. You can’t spend money as you please because you have to control it so your business can continue to run.
Cash flow management can be done by setting a budget for daily shopping needs (for personal needs). Meanwhile, for business, you have to think about operational costs, purchasing raw materials for products, employee salaries, and much more. Therefore, a monthly budget will show how consistent you are in managing cash flow.
- Separate Personal and Business Money
Don’t mix your personal finances with your business finances because it could actually mess up your financial condition. You will be confused when your personal money and business money aren’t separated, so create a separate account. The expenses of both are different, so mixing them makes it difficult for you to track your finances clearly.
- Collect Receivables on Time
There are many forms of obstacles in managing cash flow, one of which is stuck money. This is usually closely related to receivables that have not been collected or are not collected on time. Don’t make it a habit or cash flow will be blocked which will later have a bad effect on business.
Don’t let clients who haven’t paid pay arbitrarily outside the due date for too long. Avoid forgiving them, let alone being embarrassed or reluctant when having to remind or collect the receivables. For the sake of smooth business continuity because finances are not hampered, you need to have a smooth cash flow.
- Postpone Non-Urgent Expenses
Guide to managing cash flow includes how you can postpone expenses that aren’t too important and not even a necessity. If you want to spend money, think again whether the goal is urgent or can still be postponed. Avoid unnecessary expenses so as not to affect your personal or business financial condition.
You definitely want cash flow to run smoothly and your financial condition to remain healthy and stable. So that you don’t get overwhelmed with cash flow, ask yourself every time you’re about to spend money. If it can still be postponed because it’s not a primary need, save the money you want to use.
(Read more: Financial Planning with Credit Cards to Control Expenses)
- Find Additional Income Methods
Additional income can come from side jobs or investments that can be done simultaneously. With additional income, your finances will be smoother and the level of cash flow security will increase. You can start looking for low-risk investment methods so you don’t have to worry about losses.
- Prepare an Emergency Fund
How to manage cash flow effectively in business or personal is to have an emergency fund so you feel safe. Emergency funds can not only be applied to personal financial management, because businesses also need them. Set aside some of the profits each month for an emergency fund and this can be used for sudden expenses.
Cash flow needs to be checked regularly so you know as soon as possible when there’s a shortage of money. At least you need to check cash flow weekly or monthly so that your financial condition remains stable. This helps you run your business better because the cash flow continues to flow smoothly.
How to manage cash flow effectively should be understood so that you can handle your finances and business. Implementing this will help you so you don’t run out of money. Well-managed cash flow makes your business grow and you also feel more at ease.
