We all know cash flow makes life easier…
It’s no secret that small business owners tussle with tonnes of problems on a daily basis – such as finding cost-effective ways to produce products and/or services, increasing sales, attending to customers’ complaints and turning unhappy clients to satisfied ones, and of course, encouraging disgruntled staff and employees.
All these things can be resolved with cash.
Cash flow is essentially the lifeblood of any business, it means buying supplies, paying salaries, and investing on infrastructures.
Business owners who can’t manage their cash efficiently are bound to fail. Likewise, those who do are likely to succeed in every aspect of their business.
Cash flow is extremely important for all businesses, especially small businesses, and startups.
If you fail on managing your cash within the first year of your business, your business will definitely fail in its second year.
Here are clever management tips no one ever tells you…
Anticipate Your Future Needs
The last thing you want for your business are surprises.
You want to be able to anticipate the future and properly prepare for it.
After all, there’s nothing more disheartening that looking for money when you desperately need it.
To start with, keep timely and accurate accounting records to understand the financial standing of your business.
Use your previous monthly revenue, cash flow statement and balance to compute the cash available and predict the possible results for the nest 3 to 6 months.
This type of pro forma statement can let you know in advance of any shortfalls in your cash flow, giving you the ample time to prepare.
Some businesses anticipate their future needs by establishing a relationship with a bank, which they can use for general company accounts and payrolls.
Some also supply bank officers with their operating statements to build a good relationship and establish trust.
This however, doesn’t always work, as it mostly depends on the bank officer’s authority.
To better improve your chances, it would be wise to notify your banker that you may seek their help (through a loan), to make it crystal clear to them that you intend to ask for financial help if needed.
Set a Target
Preparing and maintaining a cash flow forecast is one way to control your cash flow.
This forecast can be updated weekly and will provide a more accurate outlook for your business for the coming six to twelve months.
Give the necessary attention by setting targets for credit controllers.
Make sure you provide ownership and level of satisfaction to hit and beat your targets.
Determine The Breakeven Point of Your Business
Know that your business will become profitable, not that it will affect your cash flow (it won’t) but it gives you the early goal to work for and the ready-made targets to project cash flow in the future.
Negative profits and negative cash flow make an ugly combination.
Manage your cash flow by focusing your attention the moment you realise your first profits.
Focus On Managing Your Cash Flow, Not Profits
This may sound contradictory on the previous rule, but it’s actually not. Your breakeven point is your benchmark. After you reach that benchmark and your business starts to become profitable, you definitely should manage your cash flow as you have reached the next stage of your business.
Your breakeven point is your benchmark. After you reach that benchmark and your business starts to become profitable, you definitely should manage your cash flow as you have reached the next stage of your business.
After you reach that benchmark and your business starts to become profitable, you definitely should manage your cash flow as you have reached the next stage of your business.
Managing your cashflow needn’t be a nightmare.
Contact us for a free consultation and we’ll give you even more pointers on how to accelerate your business.