Steps to Improve Cash flow
I’m always on the hunt for relevant info and I loved this - one of the best articles I’ve seen on this topic for a while. Here are a few paragraphs as a taster...
Cash flow = Money Coming into your business – Money Going Out of your business
Cash flow is the life blood of any small businesses, so make sure you closely manage it. Ideally, you will always have more money coming in than going out, but the reality for most small businesses is that this is not the case. Most have to pay staff and suppliers before they get paid themselves. This lag in payments is a major challenge for small businesses, and how well you manage it will have a major impact on the health and sustainability of your business.
Small businesses focus on managing expenses and generating sales, but can forget to manage cash flow. A lack of cash, even temporarily, has the potential to adversely disrupt your business and your ability to generate revenue. It can limit access supplies and staff, can result in late fees and interest charges and create stress for yourself which impacts your decision making.
Any problems with cash flow need to be dealt with immediately, rather than hoping that they will resolve themselves.
The following guide outlines ways to improve the cash flow for your business.
Is your business profitable?
Your cash flow problem might be because you haven’t got the basics right. While it seems like an obvious thing, a quick check to make sure your total revenue (sales) is greater than your total expenses should be the first place you start. Not making an allowance for all your expenses in your pricing is a common mistake made by small businesses. Remember you still have to pay for fixed costs so your margin needs to cover these.
Understand the cash flow of your business
Businesses go through cycles (highs and lows) and while they can even out over time, they can put pressure on the business. Have you got enough to cover the ups and downs of your business? If you have a busy December and a quiet January do you have enough in reserve to get the supplies and staff you need to get through the busy period? Do you have enough to get the bills paid when it goes quiet? By analysing your historic cash flow you will understand where the peaks and troughs are for your business and be able to manage your cash to cover these periods.
Understanding these patterns will help you with more than just cash flow. It will assist you in managing related areas such as staffing and marketing. Knowing that you historically have a slow month in June can help you decide to run a marketing campaign in April to generate new sales for this period, rather than run one in October for an already busy December.
A budget can help level out the highs and lows.
Pretty valuable stuff, I’m sure you’ll agree! Why not check out the whole article here https://clevercow.com.au/5-steps-to-improve-cashflow/ and share your thoughts with me afterwards: call (0407) 181 004 or email me at [email protected].
Thanks,
Andrew