Tips for Managing Your Cash Flow as a Small Business Owner
Successful businesses pay attention to their finances, particularly their cash flow. You'll probably agree that this type of strategy ensures that your expenses are paid on time, in full, and without leaving your small business strapped for cash. Following proven cash management strategies can give you the kind of security you need and want in the financial operation of your business.
Begin with a Cash Flow Target and Projection
Setting financial goals increases the likelihood that you will meet them and gives you a clear direction of where you'd like to be, as well as whether or not you have what it takes to reach your goals. The survival of your business is contingent on the cash flow that you are able to manage. Individual profit margins aren't going to pay the bills alone. Focus on channeling the money into your company and you won't need to focus on getting a loan from the bank.
Set Up Your Invoice Immediately
While the temptation might be to relax and wait until a more convenient time to set up your invoices, important items like these shouldn’t be left on the back-burner. Complete your invoices as soon as you complete the work. This simple, yet highly-effective, strategy keeps your money flowing in the right direction - to your business.
Identify Payment Terms at the Onset of Your Business Relationship
There's a time and a place to be the "nice guy or gal," and it doesn't involve waiting to set up the expected terms of payment. Your employees and creditors all expect to get paid promptly and according to a prearranged formula. How can you guarantee your company's ability to do that if you don't know when you can expect to get paid?
Stabilize Cash Intake
If possible, you might want to consider requesting a specific payment date for regular, monthly clientele in order to facilitate cash flow and firm up your expectations at the same time. Offering monthly retainer packages as an option, whenever possible, provides another method of ensuring that you earn the necessary funds each month to meet your financial obligations.
Accelerate Cash Collection
Avoiding personal and/or business checks that must be sent through postal mail is a good way to accelerate your cash collection. Technology has simplified payment processes, making it easier than ever to collect on debts. Electronic payments are convenient way to collect that gives you better control over your funds as well. Electronic payments are deposited directly into your business account, streamlining the collection process for your company.
Prepare for Worst-Case Scenarios
Believe it or not every company eventually goes through a rough patch when cash flow dwindles and bills pile up. If you'd like to avoid having to beg someone for a loan, maintain a professional relationship with a bank - just in case! If you have a solid connection with a lender who is going to be willing to help you out with a short-term loan on those rare occasions when you need one, then you won't have to sweat it out when they happen.
For more information on how you can effectively manage your cash flow as a small business owner, contact our team for your consultation.