Keeping the cash flowing can be a big challenge for small businesses, but it is very important to do so. Cash flow is the lifeblood of any company and you need to know how to handle tough situations.
Chances are, you will encounter a cash flow problem at some point and you don’t want it to spiral uncontrollably into unwanted debt or even bankruptcy. Managing your cash flow should be one of your highest priorities as a business owner, but if you’re having trouble with the task, or just don’t really know what to do, follow these few suggestions and you should see your problems disappear.
Use Cash Flow Projections
The more information you have at your fingertips, the better decisions you can make. You will find it difficult to examine your cash flow situation if you have no expectations, so the first thing you need to do is develop a cash flow projection.
Projections should be as realistic and as detailed as possible, from monthly to quarterly to yearly projections. This means that you need to have a feel for how much money will be coming in at all times, including the times you expect to be slower, whether for seasonal or other reasons.
Make your projections official. Use a spreadsheet so you can physically see the results. There are many templates available. This way, you can be more accurate next year.
Let Your Clients Know Your Payment Expectations
The best way to avoid cash flow problems is — surprise! — to keep the cash flowing. And the best way to do that is to get paid on time, every time.
When you get a new customer, they should know right away how to pay and when you expect payment. Follow up on any invoices you send out and reiterate when the payment is due. Once they pay you, send them a thank you: this will encourage timely payments in the future.
If a customer passes the payment deadline, notify them immediately. This will let them know that you are serious. If you delay, then they may get the idea that you are okay with late payments every time.
Keep it Steady
Making sure to keep the cash coming in at a steady rate is key to avoiding financial problems. If you do find yourself in times of trouble, websites like DebtFreeOhio.com can help you fix them.
You can keep a steady cash flow by asking for half payments up front or billing more often, say, bi-weekly rather than monthly. You can also offer small discounts for early payments, which will encourage clients to settle up and avoid late payments.
Any combination of these steps can help keep the coffers full. You can also make small adjustments like moving to digital invoices rather than print to avoid delays and offering incentives for cash-on-delivery.
As a business owner, you want to do everything in your power to keep your company afloat, and a steady cash flow is a great start.
Joel Carey is a financial analyzer. Out of office hours he enjoys writing for business blogs on the subject that interests him, and hopes his articles will help small business manage their cash flow better.
