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Guest Post by Suzie Wilson at Happier Home
Cash flow is the life force of your small business. Even though it only provides a projection of growth and stability, these numbers can often be sufficient to show you where the company is doing fine and where you’re going wrong. Some entrepreneurs can even turn substantial profits while yielding negative cash flow because they aren’t handling their assets efficiently. So how do you help your business maintain a positive cash flow? Read on for some effective practices.
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If your venture is experiencing cash flow changes, it’s always a good idea to step back and analyze what’s working and what isn’t. And when that time comes, consider these tips to help you manage your resources more effectively and maintain a more positive cash flow.
It can be highly tempting to overlook small expenses, especially in larger firms, but if you operate a small business, negligence like this can harm your startup. Ensuring that all your employees know what the limits are and what they can claim is imperative. Over a year, even small expenses can begin to leave unpleasant marks on your bank account, so you need to ensure that you and all your employees are on the same page.
Expanding businesses can end up running out of money when they use their working capital to create a new product line or purchase expensive equipment, which leaves little left for payroll and creditors. It would be best if you keep your working and growth capital separate to ensure that you always have enough cash on hand to sustain business continuity.
Staying on top of your cash flow is a crucial part of owning a business, but it shouldn’t be the only thing that has your attention. Work with a trusted financial consulting firm or freelancer who can take care of various parts of your business that need more focus. A financial consultant can guide your company’s finances by lowering the expenses, increasing revenue, and offering a new perspective and set of skills that help you build wealth. When looking for a freelance financial consultant, use a trusted online job board where you can read reviews and compare rates and offerings to make sure they fit your needs.
You also need to stay up to date with your numbers — more so if you’re close to your break-even point. Other business aspects you can outsource are accounting, marketing, recruiting, and operations. By working with a reliable team, you’ll be taking off your shoulders a significant portion of the stress of running a business. Outsourcing helps you relax more so you can come up with new and fresh ideas to make your business grow even more.
On the cash inflows spreadsheet, consider removing or adding influxes just to create a hypothetical situation. You’ll immediately be able to see all the consequences that follow your activities during the following months, giving you the chance to come up with a plan of action as and when you are faced with such a situation.
Everything goes smoothly with a plan, including managing the payment terms of your customers. Ask as many questions as possible and do your research before you develop new trading collaborations. Even with no long payment terms involved, all businesses have different payment practices: Perhaps your client pays everything on the same day of every month or it’s an off-the-cuff basis, which comes with various challenges. You need to know all these aspects to be able to generate a positive cash flow and maintain it.
Create company-wide invoicing practices that ensure you get paid promptly. Invoices should be concise and easy to comprehend, billing terms should be explicit, and you should send your clients invoices immediately after you’ve provided them with services. Create a branded invoice with a free invoice template. Add your business information and logo and use whichever color palette you prefer.
Even if you don’t have ample amounts of money that you can save right now, small sums put aside every month will increase with time. Once you build up your cash reserves, they will be available for you to use in bad months or when something unexpected happens.
For these purposes, you may want to explore using a line of credit to enable you to maintain your cash reserves, so that you can use others people’s money to expand and enjoy your profit more.
Maintaining a healthy cash flow to ensure regular working capital supply is imperative to every company. These smart, valuable, intuitive steps can go a long way in providing a positive cash flow in your business for continuity. And if you feel overwhelmed and stressed from handling all the different aspects of your business, consider hiring a team of experts to help you operate your enterprise and grow it further.