No cashflow, no business. That's the reality of being an entrepreneur. But what are the things we can do as businesses owners to avoid cashflow problems within our business? Well, great news! There are a whole bunch of things you can do to avoid the most common cashflow pitfalls to ensure your businesses stays financially healthy and thrives. 

1. Track your cashflow

The first step to managing your cashflow is understanding it. Keep a close eye on your cashflow by regularly updating your statements. This practice helps you understand where your money is coming from and where it's going, enabling you to make informed financial decisions.

2. Forecast your needs

Creating a cashflow forecast allows you to anticipate future cash needs. This involves estimating incoming and outgoing cash over a specific period. Forecasting helps you prepare for potential issues that might arise and take proactive measures to ensure you're able to pay your bills and sustain your responsibilities. 

3. Have a cash reserve

Where possible, set aside a cash reserve to cover unexpected expenses that may arise or that you'll need to dip into during slow periods. This reserve acts as a financial safety net, allowing you to handle emergencies without disrupting your business operations.

4. Understand your tax implications

There are only a few things that are certain in life, and tax is one of them. If you're not on top of your taxes, its impact on cashflow can be huge and even take you offguard. Knowing how taxes affect your cashflow helps you plan better and avoid surprises. To make sure you're able to deal with any surprises, set aside some funds for your taxes and work with a tax professional to implement tax strategies.

5. Manage your receivables and payables 

Effectively managing your receivables and payables is crucial to maintaining a healthy cashflow. Issue invoices promptly and clearly state payment terms to encourage timely payments. It's also important to work with your suppliers to negotiate longer payment terms without penalties. And don't forget to regularly review your accounts receivable aging report to identify slow-paying customers.

6. Monitor your debt and your financial obligations

Understanding and managing debt is essential for maintaining a balanced cash flow. While debt can provide necessary capital for growth, it also requires careful planning to avoid overwhelming financial obligations. Identify which debts are beneficial (good debt) and which are harmful (bad debt). Good debt is typically used to invest in assets or activities that generate income or value, such as equipment or expansion. Bad debt, on the other hand, often arises from overspending or poor financial planning. Prioritise paying off bad debt to free up cashflow.

7. Build a resilient plan

Creating a resilient cashflow plan involves anticipating future financial challenges and preparing for them. Prepare for unforeseen expenses or revenue drops by creating a contingency plan. Continuously update your financial projections based on current and anticipated business conditions. And utilise financial management software to track cash flow, generate reports, and analyse data.