Owning a business can have its own perks but at the same
time knowing how to manage a business and its cash flow can be crucial in
keeping its survival and growth. As a business owner, keeping things doesn’t
have to hard. Here are a few steps to keep things growing in the right
direction.
Monitoring the cash flow regularly is important. This can be
done by keeping track of the inflows and outflows. The best way to handle this
is by utilizing accounting software to record every transaction to see where
the funds are going and also coming from.
Reviewing the statements on a frequent basis is important.
Checking statements on a weekly basis or even daily can help you stay on top of
the cash flow.
Creating a cash flow forecast can help you handle future
expenses. Cash flow can change based on the season or due to holidays.
Understanding and estimating your expected income and expenses for the upcoming
months can be important.
For example, sales are higher in December due to holiday
shopping but can rather quickly dip for a few weeks before picking right up.
Therefore, planning for different scenarios can help prepare for best and
worst-case scenarios. As well as for scenarios that you may need to be ready in
any situation.
Keeping the cash flow coming in also means having a process
for receivables. Invoicing promptly and sending invoices as soon as service is provided,
or goods are delivered. Setting clear payment terms also helps customers ensure
that they have payments due. For example, the invoice can state, net 30 days or
net 15 days can help customers plan on payment from before. On the other hand,
it can also state “due now” when goods are delivered.
To stay on top of payments also means following up on late
payments. Don’t hesitate to remind customers about overdue invoices. A reminder can also be set in the event the
payment is not submitted.
Keeping up with the cashflow in and maintaining the payables
by managing them strategically is important. For instance, prioritize the
essential bills first: rent, utilities, payroll. Take advantage of early
payment discounts that are offered by some vendors. If cash flow allows, pay
early to get the discounts offered. On the other hand, you can also negotiate
payment terms with vendors or suppliers without incurring any penalties or late
fees.
Next, overseeing and controlling expenses. Understanding
what is needed and eliminating any unnecessary costs can keep cost down. For
instance, shopping around for better deals on services and vendors and
considering outsourcing what is not critical to your business to save money.
Controlling expenses also means managing inventory. Keeping
up with inventory and ordering early can save money instead of ordering
expedited due to shortage in stocks. Having a system to manage inventory can
help you with overstocking or understocking.
Adding software can help tract easier and predict if something will be
needed for the future.
To keep things under control and stress down, considering
financing options can be a smart way to handle unexpected expenses. Banks can
offer lines of credit to use in case of emergencies. Short term loans for
immediate cash flow needs can be useful and available for businesses. Utilizing
invoice factoring when needed to sell unpaid invoices to a factoring to get
cash quickly.
Furthermore, diversifying revenue streams by adding and
exploring new products and services can expand your income. Explore and invest
in marketing strategies that have a high return on investment.
Businesses often fail to set funds aside for taxes aside and
can harm the cash flow when they are due. Taxes have high penalties and can
grow to higher amounts quickly. Setting money aside regularly for taxes can
help you when the tax obligation is due. Consulting with tax professionals can
also help you ensure you are taking advantage of all the eligible deductions.
Setting processes in place can help business run smoother
and utilizing technology can help automate many of the tasks such as invoicing,
reminding payments due and other tasks that can become cumbersome. Technology
also provides data which can be utilized to improve further. Utilizing data
analytics to gain insights into your cash flow trend can help you make smart
and informed decisions.
It’s always best to seek professional advice from a
financial advisor or consult with an accountant. They not only can guide you
but can provide tailored advice based on your business needs.
If you need support and advice with your cash flow
management, our financial advisors at Karstens Wealth are available; we offer cash
flow planning and strategies for you to
make your business successful. Call us at 833-657-8400 and talk to Jake.