If “money can’t buy happiness,” ask a small business owner how they’d feel with a regular influx of cash on the books - at the very least a few extra dollars might account for some extra zzz’s each night.
Most small business cannot survive without effective cash flow management. According to Fundera, 82% of businesses fail because of cash flow problems. Juggling accounts payable and receivable, accounting for shortfalls, even opportunities for expansion are reasons to keep your money flowing in the right directions. Here are 6 tips to take with you:
- Project cash flow. Control cash income and outcome by using a basic spreadsheet from the U.S. Small Business Administration. Cash flow forecasting is valuable for pinpointing where you need to inject more money, or where there is an abundance, and it will help you secure a business loan, too.
- Review expenses. In order to manage cash flow, you need to keep an eye on your costs consistently. Check in with your accountant, generate reports from your accounting software so you can evaluate expenses vs. your budget and everything in-between. Oftentimes, accounting software can generate charts as well – looking over visual representations of your cash flow can give you a different perspective. There's a lot of simple templates available online to help get you started.
- Invoice promptly. The faster a customer gets billed, the quicker you can get paid; so bill as early as possible.
- E-invoicing. A great way to help make sure you’ll get that invoice paid is to use online invoicing software. Customized invoices will help you speed things up and can tie in to your accounting software so your cash flow is updated in real-time.
- Watch debt. Will that business loan that you’re considering taking out bring the return on investment you’re hoping for?
- Due diligence. Have you been paying the same prices for utilities, software, supplies, even healthcare? Consider shopping around and even re-negotiating with your vendors. Small savings can add up over time.
Cash flow management is an organic process that will ebb and flow as your business evolves. Consider these tips to help get a bigger picture of how your finances are dictating your small business.
Fundera, Inc. is not affiliated with AmVenture Insurance Agency, Inc. and has not endorsed AmVenture or its products or services.