Cash flow management is essential to the financial health of any business, or even an individual. Well-managed cash flow not only covers day-to-day expenses but also lets you plan for the future and avoid financial crises. Here is a short detailed guide including
- A checklist to assess your cash flow
- A list of free tools to help you keep your cash flow positive.
Checklist to forecast your cash flow
1. Tracking inflows and outflows
Regularly tracking all your financial transactions is crucial to understanding where your money goes:
- Record all your monthly income and expenses: Use a spreadsheet or accounting software to record every transaction. This gives you a clear picture of your finances.
- Compare income and expenses: Do a monthly review to check that your income exceeds your expenses. If it does not, it is time to take corrective action.
2. Cash flow forecasting
Forecasting your future cash flows is essential to avoid unpleasant surprises:
- Build monthly forecasts: Use forecasting tools to estimate your future income and expenses.
- Take peaks and troughs into account: Identify the months when expenses are higher or income is lower, and plan accordingly.
3. Receivables management
Effective receivables follow-up can improve your cash flow:
- Track late payments: Keep a list of customers who owe money and the amounts due.
- Follow up quickly with late-paying customers: Send regular reminders and follow collection procedures. Ideally, use a tool that automates reminder management.
4. Cost control
Cutting unnecessary costs can free up financial resources.
- Identify non-essential expenses: Review your expenses and identify those that can be reduced or eliminated.
- Look for suppliers offering better terms: Negotiate with your suppliers to obtain lower prices or more favorable payment terms.
5. Margin analysis
Make sure your prices cover your costs and generate a sufficient profit margin.
- Make sure your prices cover your costs: Calculate your cost prices and compare them with your selling prices.
- Reassess your prices if necessary: Adjust your prices to maintain or increase your profit margins.
6. Liquidity assessment
Your liquidity is a key indicator of the health of your cash flow:
- Compare your liquid assets with your short-term debts: Make sure you have enough cash to cover your immediate obligations.
- Maintain a reserve fund for the unexpected: Set aside part of your income to deal with financial emergencies.
7. Review of payment terms
A clear credit policy can help avoid cash flow problems:
- Define clear credit terms for your customers: Set strict payment terms and make sure they are respected.
- Avoid offering overly generous payment terms: Limit credit to reliable customers and impose reasonable credit limits.
Some cash flow tools
1. Accounting software
1.1 Odoo
- Description: An open source suite of business management applications, including accounting and cash flow management modules.
- Features: Invoicing, payment management, cash flow forecasts, integration with other Odoo modules.
- Price: Free Community edition, paid Enterprise edition
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1.2 GnuCash
- Description: Open source software offering personal and business accounting features.
- Features: Income and expense tracking, bank account management, financial reports.
- Price: Free.
1.3 Pennylane
- Description: An accounting and financial management platform for SMEs and startups.
- Features: Automated accounting, expense management, financial reports, bank integration.
- Price: Monthly subscription.
1.4 Dolibarr
- Description: An open source ERP/CRM for SMEs and freelancers, including accounting features.
- Features: Invoice management, payment management, customer and supplier tracking, financial reports.
- Price: Free (with paid options for additional modules).
1.5 Sage Business Cloud Accounting
- Description: Online accounting software widely used in France.
- Features: Invoicing, payment management, cash flow forecasts, financial reports.
- Price: Monthly subscription.
2. Spreadsheets and forecasting tools
2.1 Microsoft Excel
- Description: A powerful spreadsheet for creating custom worksheets to track and forecast cash flows.
- Features: Free templates, advanced calculation capabilities, charts and pivot tables.
- Price: Paid (included in Microsoft 365).
2.2 Google Sheets
- Description: A free online spreadsheet offering features similar to Excel.
- Features: Real-time collaboration, free templates, integration with other Google tools.
- Price: Free.
2.3 LibreOffice Calc
- Description: An open source spreadsheet that is part of the LibreOffice suite.
- Features: Advanced calculation functions, compatibility with Excel files, charts and visualization tools.
- Price: Free.
3. Specialized cash flow management tools
3.1 Agicap
- Description: A cash flow management tool designed for businesses.
- Features: Centralized management, forecasts and scenarios, bank connectivity, detailed reports.
- Price: Quote-based.
3.2 PlanGuru
- Description: An advanced budgeting, forecasting and financial planning tool.
- Features: Multi-year financial forecasts, scenario analysis, detailed reports.
- Price: Monthly subscription.
3.3 iPaidThat
- Description: A French expense and cash flow management tool for businesses.
- Features: Invoice centralization, bank integration, automated payment reminders.
- Price: Monthly subscription.
3.4 Evoliz
- Description: Online management software for SMEs, including invoicing and cash flow management.
- Features: Invoicing, payment tracking, cash flow forecasts, financial reports.
- Price: Monthly subscription.
3.5 Henrri
- Description: Free, comprehensive invoicing software for entrepreneurs and SMEs.
- Features: Invoicing, payment management, cash flow tracking.
- Price: Free.
These tools, whether free or paid, can greatly simplify your company’s cash flow management. Depending on your specific needs, choose the tools that offer the most relevant features to maintain healthy and stable cash flow.