Quick Tips to Manage Your Small Business Cash Flow
Small businesses are confronted with a range of challenges when getting started. While it's common for owners to think that becoming profitable is their number one priority, managing cash flow is far more critical for a company's survival.
If you think about every resource in your business, the most valuable thing you have is the cash available. Cash is the lifeblood of any business, as it fuels operations to keep your company running. Without it, there is no away to pay expenses or invest in new products. While your business can survive for some time without making a profit, it will not last long without any cash.
If you're having issues managing company cash flow, don't get frustrated as you're in good company. Cash flow problems are caused by a variety of things like late payments or unexpected bills. However, with the right systems in place, along with a bit of planning, it is possible to decrease cash flow problems and protect your business.
Regularly Measure Cash Flow
When cash is limited, small businesses become fragile and unstable. Business owners need to keep an eye on cash levels by measuring cash flow weekly. It would be best if you had a thorough understanding of what you owe, who owes you, and what the payment terms are. Set aside time once a week to review your cash flow position and plan. Keeping an eye on your cash flow means you are less likely to encounter any surprises and have more time if issues do arise.
Accurate and Timely
Measuring your cash flow regularly is essential, but it's not enough. You need to ensure your financial information is accurate and delivered to the right people. To ensure accuracy, parter with an outsourced accountant that has a strong understanding of cash flow and how it affects your business. Basis 365 works with its customers to ensure your accounting information is up to date, so you can always have quick access to your cash position at any time to make crucial decisions for your business.
Keep it Simple
Just because Basis 365 is handling your accounting doesn't mean you can forget about your cash flow. If you're not confident in your numbers, educate yourself. Ask questions, and things will become less daunting. Work with Basis 365 to forecast your cash flow, as a reliable accounting system will help you stay organized. Complicated accounting processes lead to confusion and the mismanagement of your cash flow.
Invoice Immediately
To ensure a steady flow of funds back into your business account, you need to set proper expectations with all your clients about payment expectations. You only have once chance to "train" a client on how you expect to get paid, so set up reason terms and don't offer extended payment terms if your business can't handle it. It's also critical you don't sit on invoices. Bill your clients as soon as work is completed. Invoices should be easy to read with vital information prominently displayed. To speed up the payment process, offer your clients a discount if the invoice is paid early.
Cash Reserves
No matter how much planning your business does, at some point, you may encounter cash flow issues. These issues could come in the form of a seasonal dip in business or an unexpected expense. Whatever the reason, you need to have cash reserves in place to help you get through the shortfalls. Having a solid understanding of your business cycles and planning ahead can help you avoid any dips. Having reserved on hand can give you the confidence to grow your business and act on opportunities that come your way.
Final Thoughts
Managing your cash flow is critical to ensure that you can focus on your business, rather than its accounting. (Leave that to us) Take small steps to make sure your business is ready for any unexpected ups and downs. By preparing for the unimaginable, you are confident that you can handle whatever comes your way.
