Keeping it in the Bank

TRY THIS TIP TO KEEP YOUR CASHFLOW POSITIVE AT ALL TIMES

The cashflow of any business is constantly changing.  You can have a good year, lots of new sales coming in but if the money is not hitting the bank quickly enough, growth can send any business broke very quickly.

Here is a tip we use to help cashflow and ensure our company has a good reputation for paying our invoices on time.

Invoices arrive via email and post on a daily basis and each one is due at a different time.

Once you have verified the invoice is payable and entered it in your accounting system, make sure you always enter the correct due date for payment.

Your software should now allow you to create a batch of payments that are all due on the same date.  Why not process the payment batch now, even if the due date is in the future, and load that payment match into your online banking software to be scheduled and paid on the due date?

What we’ve found is that every time we log into our banking software, we can see a list of future payment amounts and dates and the software automatically calculates when we will need to deposit more funds to cover the future payments.

This means our current balance is higher as we are not scheduling the payments to deduct from our funds today, it will happen in the future.

For those who are really organized, you can setup a second account with our bank that pays interest on daily balances and now you can sweep the funds into the savings account and bring them back into the trading account when the next payment is due that will reduce your balance below a safe operating balance.

You should have achieved three things by making this small change:

1) All payments to suppliers are always made on time

2) Your average bank balance will go up as you are paying on the due date every time

3) You have earned interest on the funds by sweeping them into a savings account until due date for payment arrives

Does your accounting system allow you to create batch payments by invoice due date?

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