Proper cash flow management is critical for the success of all businesses as nearly all experience fluctuations in their cash cycle. According to the National Federation of Independent Business (NFIB); more than 80% of businesses fail due to the mismanagement of cash flow. However, with proper planning, discipline and advances in technology, businesses can improve their chances of having enough cash flow to carry them through their ups and downs.
Building up financial reserves is certainly one of the best things a business can do to help manage cash flow. While many understand the importance, it can be difficult be difficult to carry-out due to the nature of conducting business. Committing to a disciplined approach can help and those that do will be in a better financial position to manage cash flow fluctuations when they occur. Some fluctuations such as seasonal trends can be forecasted, while more unpredictable ones such as changes in the economy or unforeseen events like coronavirus, highlight the importance of planning and building up reserves.
Planning, Technology and PMC PayGo
There are tipscompanies can follow to better manage cash flow, andaccording to Entrepreneur, there are three metrics companies can track to help:
(1) Collection Dayswhich is a measure how long it generally takes to get paid
(2) Inventory Turnoverwhich measures how long inventory sits without moving
(3) Payment Days, the time it takes to pay vendors
These metrics provide vital signs of cash flow, so projecting them 12 months ahead and monitoring them can help businesses better prepare for down times.
Talking to vendors about extending billing cycles on accounts payable or negotiating longer payment terms can also help with cash flow. If you are straight forward with vendors, talk to them before getting behind in payments, and are reasonable about the time you would prefer to make your payments, the chances of them agreeing to more flexible terms can improve.
There is a variety of technological solutions available to help manage cash flow. They range from online invoicing and direct payments to payroll software and more. PMC PayGo is a PMC proprietary, web-based system that helps businesses easily manage and pay workers’ compensation premiums. With PMC PayGo, premium payments are based on actual reported payrolls instead of estimates, which can save money, free up cash, and minimize end-of-year audit surprises. Platform features include:
- Broad carrier appetite with multiple carriers participating
- Flexible payment schedules include weekly, biweekly or monthly reporting options
- Flexible payroll reporting allows for self-reporting, partnering with an approved payroll vendor, or uploading payroll via internal payroll system
PMC PayGo is a convenient and simple solution that is easy to implement.
Effectively managing cash flow fluctuations can be done with planning, technology and PMC PayGo. For more information about PMC PayGo or our workers’ compensation solutions contact us at PMC Insurance Group.