3 Tips to Understanding How Cash Flow Can Keep Your Business Successful

Are you a woman entrepreneur with ambitious goals for your business this year??

Who am I kidding…of course you are!?

That being said, you likely already know that the key to success is ensuring that your business possesses the qualities it needs to run like a well-oiled machine. We also know, of course, that doing so is a lot easier said than done…particularly when it comes to the oh-so-dreadful subject of cash flow.?

Cash flow is intangible in the sense that it feels like it’s here one day and gone the next. And losing control of your understanding of where you stand on any given day allows feelings of frustration and fear to grow. As we talk about a lot here at Your Biz Rules, these negative emotions certainly do nothing in the name of progress.

With more clarity and understanding around the subject, you can develop a strengthened sense of control over your cash flow and, ultimately, the success of your business!

Ready to hop back in the driver’s seat? Let’s get started!?

What Cash Flow Is Not:

Cash flow is not your bank account balance.

Most business owners view managing their finances by using personal management strategies, such as–?

1. Reconciling their checking account to know where their balance is.
2. Checking what's going to come in or hasn't cleared the bank yet.

These strategies are valuable and reflective of good personal cash flow management, but they are not applicable to the cash flow of your business.?

To help provide you with more clarity around this concept, I'm going to share three tips that can help you better understand cash flow and use it to keep your business success growing in the new year.

Three Tips to Understand How Cash Flow Can Keep Your Business Successful:

1. Understanding the difference between revenue, profit, and cash.

The saying goes, “Revenue is vanity. Profit is sanity, but cash is queen.”?

It’s no secret that most business owners focus primarily on revenue. Unfortunately, this usually results in a less than ideal outcome. You can work long hours, have many sleepless nights, and be left with no energy to spare and still look at your bank account and think: “What do I have to show for it?”?

When I hear this, I know the focus has been too heavy on revenue, and you know what? If that’s you, that’s okay! This is also how you know you are in the first stages of growth and are ready for the next: profitability.?

Bottom line: Revenue is essential, but you want to have enough profit and make sure it’s healthy enough to produce cash.

2. Knowing how to identify a healthy cash flow.

Healthy cash flow is measured individually because it looks different from business to business. To determine your healthy cash flow and place the necessary benchmarks, there are specific metrics that need to be analyzed, such as:

• How long does it take you to gain a client?
• How long does it take to deliver your service?
• How long does it take your clients to pay?

If you take all the time it takes to gain a client, deliver the service, and get paid, that gives you an idea of the time your investment in marketing takes to produce a return in the form of client payment.

Then take at:

• What does your outbound money look like?
• What's your other income look like?

You could use various factors to determine the proper benchmark for your business, but the key here is to establish what ‘healthy’ looks like for YOU. When you have that metric that can answer the question of “Are we performing well or not?”, you can start to make different decisions. Decisions such as:

• When is a good time to invest?
• When is a good time to spend?
• When can you make distributions to yourself?
• When should you be a bit more conservative?

These are the decisions that give you the ability to make intelligent decisions in your business to maintain durability and stability for a long time.

3. Preparing for the expected and unexpected.

If you have been in business for any time, you know to expect the unexpected. And what happens when the unexpected strikes?

We are likely to feel:

• Chaos
• Stress
• Overwhelm
• Worry
• Disappointment

All of these negative emotions indicate that maybe you weren’t as prepared as you should have been. Yes, it’s impossible to be prepared for EVERY possible scenario, but we can be prepared for most. And when we do, our businesses are in a better position to build financial stability, impact, and a legacy.

This article first appeared on the Your Biz Rules blog. For the full article and accompanying video, head to: 3 Tips to Understanding How Cash Flow Can Keep Your Business Successful

If you are looking to create more predictable profits so you can grow and scale without burnout, let’s chat. Feel free to send me a DM or find time on my calendar so that we can make it happen.