
The Best European Business Bank Accounts for Digital Nomads
If you are looking to make a European escape (at least for a while), here are some options to consider as you search for the best bank account for digital nomads like yourself.
You might think profit is the most important financial measure in your business, but a healthy cash flow is just as vital. Your business can be extremely profitable, but if the timing of your cash in and cash out goes wrong, you could be left with no money in the bank to pay your creditors, employees or suppliers.
If you manage your cash flow well, you’ll reduce stress and have a financial buffer to deal with the inevitable surprises that arise in business. Read on to learn how to manage your cash in and cash out, and generate a healthy cash flow through your organization.
Your cash flow is the overall term for how money moves into, through and out of your business. It’s related to the actual money you have right now, rather than how much is promised (through invoices and accounts receivable) or owed (through bills and accounts payable). Because cash flow is so important to your business’ financial health, we’ve covered various aspects of it in-depth:
Your “cash in” represents the revenue and other income flowing into your business right now. Your “cash out” represents the expenses and payments you’re making right now. Your “cash on hand” shows how much money you have available to use in the bank.
Good cash flow management is about maximizing and speeding up your cash in while minimizing and slowing down your cash out to keep a healthy amount of cash on hand.
The profit and loss statement in your business does not represent your cash flow — it only shows whether you’re profitable over the length of time you’re measuring. Cash flow deals with what is happening right now, and it’s impacted by areas including:
You need to spend as much time tracking and improving cash flow as you do making sure your business turns a profit.
The easiest way to track your cash flow is by reconciling your cash in and cash out through your accounting system. Although this sounds like a mouthful, it’s relatively simple in practice. Reconciliation simply means importing your bank and other statements into your accounting software, and then tracking where the money has come from and where it’s going.
If you do this on a daily basis, you will always know exactly how much money you have on hand, as well as whether you’re likely to hit a shortfall in your cash flow.
Let’s dig into a few ways to improve your cash flow.
Tracking cash flow is vital to good business health. If you don’t have time to do it yourself, we recommend hiring someone to reconcile and monitor cash flow and alert you to any issues. Alternatively, you might want to use online accounting software to reconcile your transactions so you can understand your day-to-day cashflow. Xero, Quickbooks and Freshbooks are all good options. Our CFO at Revenued uses Sage Accounting Software and highly recommends it.
Your business budget shows the expenses you’re planning on making. As you track cash flow and outgoings, match those costs against the budget. If you’re noticing unusual variations, see what you can do to reduce those costs or re-forecast your budgets.
The most effective protection against cash flow problems is to have plenty of cash on hand. Look at all the expenses your business makes on a monthly basis, and keep money in the bank to cover those expenses. We recommend retaining around three month’s worth of business expenses as a cash buffer.
Product-driven businesses and retailers often have a lot of their cash flow tied up in inventory. Make sure you manage your inventory properly to minimize lead times with suppliers, understand trends and forecasts and keep appropriate levels of stock.
Your “Accounts Receivables” are the revenues you’re expecting to collect from customers, typically because you’ve invoiced them. Healthy cash flow depends on getting paid quickly; here’s how you can achieve that:
If you’re in desperate need of money, you can consider changing your pricing for a short-term boost to your sales. Take account of your profit margins so you’re still selling at a profit. Over the longer-term, experiment with pricing to maximize turnover and profitability.
Your “accounts payable” are the various bills you need to pay. The payment terms will be defined on a case-by-case basis. You can delay bills until they are due and set reminders to pay them. However, make sure you are not late with payments — that can damage your relationships with your suppliers and potentially lower your business credit score.
Business credit cards can be extremely useful for extending the time you have to pay bills. Pay them off as soon as possible, though, so you can avoid excess interest charges. We recommend looking at several key areas when choosing a card:
If you need money now and you have outstanding or regular invoices, a merchant cash advance (MCA) could help. An MCA financial services provider will agree to purchase your business’ account receivables at a discounted rate, essentially “advancing” you your future business revenue. You pay off the MCA with a daily payment withdrawn until the full amount that was agreed upon has been received by the funder. If you need an MCA or want to learn more, we can help.
Good cash flow management will strengthen your business and get you ready for growth. Once you’re tracking cash flow, try out this advice to optimize your cash in, cash out and cash on hand.
If you are looking to make a European escape (at least for a while), here are some options to consider as you search for the best bank account for digital nomads like yourself.
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