5 Tips for Better Cash Flow in Your Business
A positive cash flow is the life blood of any thriving business. Cash flow is the difference between incoming and outgoing money. To have a positive cash flow, you must have more incoming money than outgoing expenses. However, many small business owners don’t look at these numbers. They never have assurance that they are being profitable and therefore, they are feel uncertain about what they can and cannot truly afford.
Here are 5 tips for better cash flow in your business:
1. Be Aware of your cash flow.
How often do you look at your accounting numbers? How often are you looking at your Profit and Loss statements? These are essential numbers to stabilize cash flow and give you an accurate representation of what you are bringing in income and using in expenses each month. If you never look at these numbers, how will you know where you need to make changes?
2. Make Billing/Invoicing a Priority
Like everyone else, you have deadlines for your bills. Moreover, you can’t expect your customers to be ready to write a check if you don’t ask for payment. Therefore, make billing a priority in your business systems. Create a system that keep you on track to send out invoices on time. Therefore, you will have a more regular flow of income.
3. Follow up with late payers.
Nobody likes to harass anyone about money. I get it. However, when cash flow is a priority, you need to have a system in place that identifies late payers. Establish a follow up process that you use for every late payer and execute it the day after the invoice is due. Sometimes it’s a simple email or phone call that is necessary and it could make a big difference to your cash flow.
4. Monitor your outgoing expenses.
Many business owners put expenses on their company’s credit card. They auto-pay them without giving it a second thought. However, create a system whereby you evaluate your recurring charges. Decide if you still need or use those subscriptions. Moreover, look at the expenses on your card. How much are you spending on travel? How much are you expensing on food? Then, determine if you can cut back on any items to improve your cash flow.
5. Know the seasonality of your business.
Most businesses have busy seasons and quiet seasons. By identifying the seasonality of your business will give you insights to store cash flow. During the busy season with big income numbers, choose to store cash in a money market account and not put everything into your operational account. During the leaner months, you can draw from the money market account to use in your operational account. This strategy gives you a way to “stash cash” so there is no temptation to spend it because it appears to be excess. Therefore, by knowing the seasonality of your business, you can plan to stabilize your cash flow.
Growing your business will take a greater strain on your cash flow. Therefore, practice these tips on a regular basis to manage your cash flow positively. If “looking at the numbers” is not your strength, find a knowable tax professional and outsource it.
At Paragon, we believe in small businesses. Moreover, we want to help you pay less in taxes and stay in a positive cash flow. Let us help you take your business to the next level if you’re in Acworth, GA; Kennesaw, GA; Woodstock, GA; Canton, GA; Milton, GA; Alpharetta, GA; and Roswell, GA.