Managing Cash Flow: Tips For Effective Bookkeeping

Cash flow is the recorded money flowing in and out of your company’s account. It is reported in a monthly cash flow statement. If you have more money coming into your account than going out, your business is in a positive cash flow position. When more money is going out of your business account than coming in, your business is at risk of being overdrawn, and you will have to find alternative sources of income to settle these overdrafts. Hiring a good bookkeeping service in Dubai can prove helpful for your business in overcoming all these issues commonly faced by different companies.

Understanding how to manage your business cash flow statements is critical to ensure you have a smooth functioning of your company finances.

Bookkeeping Services Dubai enable you to tell where your business can make adjustments to make sure it is working towards turning a profit.

Tips for Managing Cash Flow Statements

  1. Monitor your Cash Flow Regularly
  2. try to Cut Costs
  3. Get your Customers to Pay Faster
  4. Try to Get Cash for Your Assets
  5. Obtain Credit Loans
  6. Rent and try not to Buy Equipment
  7. Keep Updated with Invoices
  8. Finance Long-term
  9. Delay Payments to your Vendors
  10. Select a Business Credit Card

How Cash Flow Statements Work For Your Business Accounts

When running a business account, it may sometimes feel like cash only flows one way that’s out of your business, but actually, it is moving in both ways.

Control over your cash flow statements will enable you to check where your business could be doing better, whether in your incoming or outgoing.

1)Monitor your cash flow regularly with the help of bookkeeping services in Dubai.

As mentioned above, preparing a monthly record of your cash outgoings and income with the help of bookkeeping services in Dubai is advisable at least every month.

This will ensure that mistakes and cash flow shortages are quickly identified and do not cause any damage to your business.

2)Try Cutting on your costs to maintain your cash flow statements.

Utilize your cash flow statements to do a cash flow analysis and check if there are any recurring extra expenses you could cut back on. They could be utility bills, rent, payroll, subscriptions, or frequent services.

If you need to reduce your expenses, try to cut the costs where possible.

3)Get your customers to pay faster with the help of bookkeeping services in Dubai.

The best possible way to do this without upsetting your customers is by offering them sales and discounts and giving more benefits to getting them to pay faster.

4)Get cash for your assets with the help of bookkeeping services in Dubai.

This tip is particularly important if you want to make some cash fast.

Your business may have some old equipment collecting dust in a storage room.

Do not let it become obsolete. Instead, consider selling or renting it out to get cash out.

5)Obtain a line of credit to maintain your cash flow statement.

 Utilize your cash flow statement to forecast your cash needs and get a line of credit or cash loan as a safety net against cash flow problems by getting assistance from the bookkeeping services in Dubai.

Be mindful of the line of credit you get.

Make sure that whatever money you borrow is worth the investment and price of the loan you receive.

6)Try to rent Equipment rather than buying them.

Avoid using up cash in big expenditures where necessary, especially regarding computers, vehicles, and other business hardware.

If you can rent the Equipment, then do so preferably. Then, you can return it at any point and quickly change it for the latest model or features.

7)Keep up-to-date with your invoicing with the help of bookkeeping services in Dubai

Design your invoice template in such a way that they become straightforward to fill in.

You want something that will make invoicing your clients easy and avoid causing you to make mistakes.

8)Finance Long-term Contracts or Large Orders 

Asking for an initial deposit or partial payment means you have some cash to purchase the materials you require or to pay the team needed to perform the job your business is being contracted for.

It is common to ask for up to a 25% initial deposit before beginning any work on the job.

9)Try to delay payments to vendors to maintain cash flow statements.

Try negotiating favorable payment terms with your vendors by determining how late you can pay them.

Avoid late fees and engage your vendors transparently and respectfully, which honors your working relationship.

10)Use Business credit cards to support your cash flow statements.

Before you plan to take out a business credit card to support your cash flow statements, make sure there are practical benefits and rewards you can use for business-related purchases, like traveling and hotels.

Keeping track of your business’s cash flow statement through efficient management will help you avoid simple cash mismanagements that could cost you your entire business.

Understand Why is Cash Flow So Important?

The need for more cash is one of the primary reasons businesses fail. However, cash is particularly important in some business cases, including:

  • When starting a business: cash flow issues are more critical when launching a business, particularly in the first six months, and this is where bookkeeping services in Dubai can prove helpful. Money tends to fly out of the company much more quickly at the beginning when you are in the process of building up your operations but may have few customers or sales. Suppliers only sometimes offer credit terms to new companies, worried they will need more funds to pay them, increasing their financial strain.
  • Seasonal work: if your product or service is only purchased and utilized on a seasonal basis (e.g., Christmas-themed merchandise), then having a controlled grip over your cash flow statements will allow you to make provisions for the larger fluctuations in business and its generated income. Cash flow, in this case, will be essential to keep your business floating somehow during the off-season.
  • Profit does not equal cash: technically, your company can profit even if it records no cash. This is because profit is just a concept used in accounting, whereas a cash flow statement is the amount of money flowing in and out of your bank account. It includes assets like accounts receivable (money owed to your business by customers), which can not be immediately collected and cannot receive immediate cash. Always ensure you have enough cash in your company’s account to pay monthly and ongoing payments.

Using a Cash Flow Statement Provided By Bookkeeping Services In Dubai

A cash flow statement is the most effective way to track your cash flow.

It lets you get an overall view of all money flowing in and out of your business’s bank account and understand your company’s cash position every month.

Keeping track of your cash position is fundamental to keeping your company’s cash afloat.

The statement is split into three parts:

  1. Cash from operating activities
  2. Cash from investing activities
  3. Cash from financing activities

In all those parts, you can identify every cash transaction (both in and out) in your business.

The outgoings of your company’s cash will be deducted from your incoming amount to get your net cash flow.

 Methods to Prepare a Cash Flow Statement and How Bookkeeping Services In Dubai Can Be Helpful

  • Use accounting software: Some tools will be integrated to help you to generate a cash flow statement. If you need help using it, ask your bookkeeping service in Dubai to assist you.
  • Find help online: many bookkeeping services in Dubai are available online to connect you to professionals or offer free tools and templates to enable business owners to create a cash flow statement. 

Why Should You Use a Cash Flow Statement?

  • For keeping track of where your money is coming in 
  • To have an understanding of where your business spends most of its money
  • To have a ‘cash reality of your business, as opposed to the abstract accounting
  • Spot a cash shortage, which can help you plan for future cash flows. The longer you wait to fix your cash shortage, the further your business cash flow statements will fall.

To Sum Up

Understanding the basic concept of cash flow statements is important for cross-border payments.

They are complex and involve several costs, including transaction fees, a change of currency, and exchange rates, to name a few.

A snapshot of some of these expenditures can help you realize where to save money and how your business can expand internationally efficiently.

You can use these simple strategies to put your company on track to a healthier cash flow!

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