Many small businesses start strong – solid business plans, impressive products and services launches, adequate finances for continuous operations, and strong marketing strategies. But as we all know, not everything will go according to plan, unexpected events can happen which can throw off the company foundation of this once solid and strong business. If that happens, one of the top things you should protect is your cash flow.
Here are some important cash flow management lessons you should learn right now:
Anticipate and Prepare
Every industry has its unique sales volume depending on what season it is. Managing your cash flow involves identifying these high and low seasons to better prepare when it happens. Ask yourself questions ‘what if this happens?’ or ‘what if that happens?’ but don’t just dwell on the questions and make yourself stressed out, prepare to answer, and tackle it.
If you are just starting or restarting your business and don’t have a clear sense of how much you should be spending, especially at a time like this, take a look at other businesses within your industry. Take benchmarks from other companies to guide you as you create your own plan, just don’t forget that your plan should still depend on your business’ resources and capabilities.
Lower Operating Costs
Think of what you can do without and what you can spend less on as you continue your business. Right now, saving money as much as you can should be at the top of your priority. Reducing overhead to the extent possible without sacrificing quality of delivering your product or service helps increase cash flow.
Cost-cutting strategies depend on the nature of your business. Try to categorize all your expenses and see what among those can be eliminated or reduced. Just keep in mind that cutting costs should NOT affect the quality of your products or services.
Collect Payment on Time
Late payments from customers will give you cash flow problems. Not getting paid on time can result in you not being able to pay your bills on time. Don’t shy away from sending invoice reminders and in case you want to avoid following up on payments, implement policies or rewards that will encourage your customers to pay early or on time. Enforcing late payment fees or giving discounts and vouchers for early payments may do the trick.
Monitor and Track Your Cash Reserves
Save money. This does not only apply for your personal finances, but also for your business finances too. Cash reserves can be the difference between making it through a slow time or going into closure. This reserved cash can get you through hard times where there’s little to no money coming into your business – it can enable you to continue operating, retain your employees, and keep serving your loyal customers for several months even with slow income.
Pay Debts As Soon As Possible
If you want to pay less interest, pay off your debts as soon as you can. Start with debts that have high interest and work your way down until all have been paid off. It is a good practice that every time you have a cash surplus, you should pay your debts. Seasons with your highest sales volume is the perfect time to pay.
If you are a business owner who manages all that goes around your business, adding cash flow management on the list is not going to be easy. You can miss some important aspects and you might have struggles to keep on top of tracking it. A quick fix to this problem is to simply get help from professionals like a bookkeeper. They have the expertise to guide you through your cash flow and they can make the process much simpler for you.
Now more than ever should you manage your cash flow properly to avoid any kind of business disruption. Following the tips above put you on the right track!
If you need more cash flow management help, as well as keeping up with your books and taxes, contact us today! You can reach FAS by sending an email at firstname.lastname@example.org or calling 713-855-8035.