How to Manage your Small Business Cash Flow for Success
For a small business, having health cash flow is vital for staying afloat. Having a healthy cash flow simply means that you are earning revenue faster than you are using your revenue to pay expenses. Scrambling to find ways to pay your bills, payroll, and other expenses every month while you wait for revenue to come in is a sign that your cash flow is suffering.
How to Analyze Your Cash Flow
The first thing that you need to do if you have been struggling to pay bills and expenses is to analyze the flow of cash in your business. Use a template or your accounting software to create a chart that lays out where your cash comes from and where it’s going, so that you can identify the biggest problem.
If the Problem is Lack of Revenue
If the analysis shows that your biggest problem is clients not paying in a timely manner, there are things you can do to encourage payments. For example, give clients a small discount for paying immediately upon delivery, or offer to take payments over the phone during a reminder call.
If the Problem is Too Many Expenses
If your expenses are too high or are scheduled in such a way that your revenue doesn’t come in on time to pay them, you’ll either have to reduce your expenses or get a line of business credit to cover them temporarily until revenue comes in to cover the costs. Reducing your overhead costs is often the only way to make your cash flow more even for small businesses that aren’t able to qualify for an unsecured line of credit.
The goal to balance the flow of cash throughout your business is always to raise your revenue and lower your expenses. Contact Ironhorse to learn more about success in the world of small business management.