How to Improve Cash Flow Management through Outsourcing

A lot goes into running a successful business. You need the right people, the right product or service, great marketing, and so much more. One of the most critical elements is an understanding of cash flow within the business and the ability to manage it. Cash flow management is a complex topic, but one that you’ll need to master if you want to achieve success. You’ll also need to understand the role that outsourcing can play in managing your cash flow. Hint: it goes beyond just cutting your costs.

What is cash flow management?

Let’s kick off the discussion with a closer look at cash flow management and what it means for the average business owner. In a nutshell, cash flow is just the flow of money into and out of your business. Cash flows into a business through customer purchases and then out to pay bills and meet financial obligations. 

If cash flow is the net amount of cash/cash equivalents moving into and out of your business, then it follows that cash flow management is the art of monitoring, analyzing, and optimizing that movement. 

How to calculate cash flow

The first step in cash flow management is determining your cash flow. You can do this by tracking the amount of cash/cash equivalents in your business at the beginning and end of a specific period, say 30, 60, or 90 days. If you have more cash on hand at the end of the period than at the beginning, then you have a positive cash flow. If you have less, then you have a negative cash flow. 

Don’t confuse cash flow and profitability, however. They’re related but different. Profitable businesses can still struggle to meet their financial obligations because of cash flow problems. Conversely, unprofitable businesses can still meet their obligations.

The cash flow management process

Cash flow management can be broken down into four steps. 

1. Expense forecasting

Accurately forecasting your expenses is a critical step in cash flow management. While you won’t be able to predict all of your expenses to the penny, you should have a good enough grasp that you can estimate variable overheads. Other costs are predictable and recurring. 

2. Revenue forecasting

Next, you’ll need to roughly predict your anticipated revenue. Again, this will just need to be your best estimate. Begin with guaranteed revenue, such as subscriptions and contracts, and then move on to more changeable predictions. Use past performance data to help improve your accuracy.

3. Enter your information

Because of the complexity involved with cash flow management, you’ll want to use software to help you calculate everything. You’ll find plenty of options out there, including paid and free options. 

4. Calculate and update frequently

Finally, calculate your cash flow to see your expected numbers. You’ll need to do this regularly so that you can home in on trends and uncover areas where you can adjust and control things.

How to improve cash flow management with outsourcing

If you find that your outflows outstrip your inflows, don’t worry. There are plenty of things you can do to help reduce costs and keep more of your hard-earned cash. One of the most effective is to outsource key tasks. Outsourcing can help you improve your cash flow management in several ways, including the following:

• Payroll: By outsourcing key needs, you can reduce your payroll, which is a major drain on cash in a business. 
• Equipment: Purchasing and maintaining equipment is expensive. By outsourcing specific roles, you can skip those purchases and avoid maintenance-related costs.
• Access to experts: Outsourcing can give you access to highly trained professionals who might not be available to you as an in-house hire and for lower rates than what you would pay for an employee.
• Access to payment collections professionals: Depending on the roles outsourced, you may benefit from access to payment collections/processing professionals who can improve your receivables cash flow.
• Technology: Outsourcing specific roles may allow you to reduce technology-related costs, such as software subscriptions, or eliminate those costs.
• Improved productivity and efficiency: When your team members no longer need to wear multiple hats, you’ll find that they are much more productive and efficient, boosting cash flow to the business.

Finding the right partner: The key to improving cash flow through outsourcing

Outsourcing can yield significant savings and improve your cash flow. However, you’ll need to work with the right partner. Not all roles are ideal for outsourcing, and some are more beneficial to outsource than others. For instance, outsourcing reception-related roles can help dramatically with cash flow management.

When you outsource receptionist services, you automatically improve your team’s productivity and efficiency. Because they’re no longer being tasked with answering calls, they can focus on one task at a time and avoid the cost of switching between tasks multiple times. Humans cannot multitask. What we do is swap between tasks, which reduces efficiency and productivity, while leading to feelings of burnout. 

You also benefit in other ways when you outsource receptionist-related roles. For instance, professional virtual receptionists can do more than just answer phone calls. They can book appointments, screen leads, improve customer/client intake, send appointment reminders and follow-ups, and even collect payments.

Conquer cash flow management with Smith.ai

At Smith.ai, our team of virtual receptionists specializes in helping businesses just like yours improve their cash flow management and gain access to critical services and capabilities. From customizable phone answering to call recording and transcriptions, we ensure that your team can focus on what they do best while we handle the rest.

To learn more, schedule a consultation or reach out to hello@smith.ai.