Whether you are just beginning a path as an entrepreneur or you’ve been in the business for decades, you likely know the importance of sustaining a positive cash flow for ongoing success. Improving cash flow allows you to budget and plan for future growth, and it also gives you the valuable capital needed to handle day-to-day business operations.
Many business owners jump into dream building without too much knowledge or training related to bookkeeping. You’ll need to stay on top of accounts receivable, lines of credit, and other financial matters to keep cash flow consistent and your business growing.
No time to attend a business seminar on creating positive cash flow? Take these simple steps to improve your cash situation starting today, and look forward to consistent growth tomorrow and beyond:
Create a forecast
Predicting your business cash flow will help quell uncertainty by forecasting peaks and valleys in your cash balance. Taking the time to map out a forecast will help highlight these historical cycles in your business and help you predict what’s coming in and going out at different times of the year. Draw up a list of payments you’ll need to make over the next year. List the money that you know you’ll be taking in over the same period of time--this could be customer payments, interest, and investments. Subtract liabilities from your assets, and you’ll be better able to predict when you’ll need to pull back the purse strings.
Set up payment policies
Communicating a payment policy to your customers and vendors will keep cash flow consistent in your business. Make it short and simple to ensure that you get paid, keeping terms of payment clearly visible on all invoices and contracts.
Stretch out your liabilities
If you can, negotiate with vendors to see if you can start short lines of credit that run between 30 and 90 days. Not all vendors will agree to these requested terms, but there’s no harm in asking, is there? If you can stretch out some payables, it will give you additional time to bill your customers and collect before having to pay bills.
Use online technology
Refuse to get behind on organization; don’t let your invoices pile up like stacks of kindling on your desk. Purchase and use accounting and bookkeeping software that will help you organize your books. Several reputable programs will help you manage all of your billing activities from a cloud, giving you quick access to your accounts in the office, at home, and on the go.
Manage your inventory
If you regularly assess your inventory, you’ll quickly reveal the cost of holding onto various stock items. Too much inventory can result in additional storage costs, leading you to a cash-flow deficit. On the other hand, if you carry too little, it can cause delays in processing orders, and you may lose customers. Strike a delicate balance between available stock and that which you can order and take a look at your storehouse on a regular basis to maximize cash flow.
Reduce your overhead costs
All businesses have a negative cash flow; this comes in the form of inventory purchases, ongoing monthly payments, and any obligations to vendors or landlords for space and materials. There are things you should do to reduce your negative flow while still making a profit. Consider leasing company vehicles instead of purchasing and managing a fleet of vans, and check to see if you can bundle technology and phone services. Lowering staff overtime and creating environmentally friendly workspaces are other things you can do to reduce operating costs. Rather than looking at it as a pain in the neck project, focus on the financial rewards of reigning in your spending, and you’ll get more excited about every step you can take.
Create a backup plan
If other attempts at improving cash flow are not working, ensure that you can secure a line of credit with your local bank in the event of an emergency. This will allow you to cover lapses in positive cash flow when those unexpected situations do pop up. Keep track of what you are borrowing, however, as this can be a slippery slope when trying to take financial control of your business.
Let us help you maximize your dollar!
At MaxGroup Business Solutions, we are absolutely committed to your success. Our team of professionals can expertly craft marketing plans that will take your business to the next level of growth and prosperity, minimizing your time and maximizing your dollar. If you want to experience what consistent, positive cash flow feels like, contact us today. Visit www.maxgroupbusiness.com for more information.