|Small Business Cash Flow|
Cash flow is the lifeblood of any small business and how it's managed can mean the difference between your company's success or failure. Having sufficient cash on hand will ensure that your suppliers, employees and other service providers can be paid on time. It also allows companies to invest cash back into the business in order to generate additional revenue and profit and, most importantly, improve their bottom line.
Let's take a closer look at how cash flow management can affect small businesses and review how your business can take control of and better manage its cash flow immediately.
Setting up for Proper Cash Flow Management
Preparing accurate cash flow projections on a regular basis is one of the most important things a small business owner can do, as it can raise red flags to potential problems before they arise. Small business owners can start their cash flow projection by adding cash on hand at the beginning of the period with other cash to be received from various sources. However, it is crucial that other factors are also accounted for, including upcoming cash outlays like rent, inventory, salaries, benefits, taxes, office supplies, advertising, etc. The smaller the business the more readily the information will be. Larger companies may need to include a number of key individuals in a cash flow meeting to better understand the whole picture.
Better Manage Your Small Business Cash Flow
There are two key areas to analyze for better management of cash flow: receivables and payables.
If small business owners got paid immediately following a sale, cash flow would never be a problem. Unfortunately, this rarely happens, but small business owners can still improve their cash flow by better managing their receivables.
Expenses must be carefully watched when managing a growing company, as strong sales growth can conceal underlying problems. If expenses are growing faster than sales — or even if they are not — payables should be examined carefully and methods to better control them should be identified:
What is the Best Way to Take Control of Your Cash Flow Management?
Accounting software solutions for managing all financial records and cash flow on a daily basis can be beneficial to small business owners.
However you track it, cash flow is the key to your business' success, and having the right system in place will help improve your cash flow and boost your bottom line!
The Hidden Outflow
One of the main sources of cash drain is growth. If you are growing you need more cash to purchase more product, especially if you have not arranged for proper credit terms with your suppliers. Ensure that your business is sufficiently geared for growth.