Small companies, new and well-established, all face one particular hurdle—managing the small business cash flow. It makes sense why this can be such a difficulty. Typically, the small business owner is focused on growing the business so it can be easy to lose track on how much money is flowing in and out of accounts.
While mastering this skill may take years, there are a few simple things you can do to develop a better sense of control. We’ve shared five cash flow tips that you will want to take note of and begin implementing NOW—to make your business’ financial future brighter.
- Know Your Goal Cash Flow Goal – Understanding your “breakeven” and profit point will not help you improve your cash flow, but it can give you something to work towards and make management easier. In many cases, business owners are better able to focus on money flowing in and out of the firm when they realize how it impacts the bottom line. While profit is your ultimate goal, managing cash flow is a critical step towards achieving that objective.
- Collect Receivables ASAP – For many small business owners, it is at first a challenge to collect on receivables. After all, no one wants to risk alienating a customer. However, those long-range receivables make it hard to manage your cash flow. If possible, keep your net-30 and longer terms to a minimum and perhaps even implement discounts to encourage prompt payment. Enabling online and credit card payments may be a way to speed up cash collected. Keep in mind the best time to establish your terms and intent to collect is during the prospecting or point of sale phase, not after the transaction has already taken place.
- Avoid Fees – On your payables, utilities, lines of credit and bank accounts there are usually little fees that you can avoid—if you are careful. Make sure you pay all bills on time, avoid “over-the-limit” fees and figure out how to prevent other small costs. Over time, these little fees can add up to make a significant impact on your cash flow, and not in a good way.
- Maintain Cash Reserves – One of the easiest ways to control your cash flow is to make sure you have a cushion in place to get through the tough times. Enough money to cover several months of operating expenses can help you tide over on the tough times and avoid racking up debt or fees. Developing a healthy reserve isn’t always easy, but it will pay off in the long run. There is a deeper explanation on small business cash reserves here.
Keeping track of your cash flow is just one of many important bookkeeping tasks you need to stay on top of as a business owner. Sometimes, this task can be a bit too much to handle alone.
Consider outsourced bookkeeping as an affordable, simple solution that can reduce your stress and allow you to focus on growing your business. If you would like to talk to an expert about how our outsourced bookkeeping or outsourced accounting services can work for you, call or contact us at Virtual BeanCounters today. We have flexible solutions that work for companies approaching the $1M and above revenue mark.