Smart Cash Flow Habits to Keep Your Business Growing
According to research, poor cash flow management is one of the biggest reasons small businesses fail after they’ve launched. As an entrepreneur, good cash flow management is important to keep your company growing financially. Here are some tips to successfully manage money generated by your growing company:
Set up a cash flow forecast: Do trajectories for the next year or quarter, and update the forecast weekly. Identify when you expect to break even and establish the economic benchmarks necessary to meet along the way.
Balance customer and supplier payments: Money coming in must match or surpass money going out to save you from extended overdraft. To collect receivables (payments owed to you) timeously, ensure you have an effective debt collection system in place and incentivise early or upfront payments with manageable discounts. Invoice immediately – don’t wait until month-end – and don’t shy away from asking for partial payments upfront. In terms of payables (payments you owe), negotiate with suppliers and vendors to get good deals and extend payables when possible.
Be frugal: Only spend on essentials that will help achieve cash flow forecast milestones. Save in the good months – you need a cash reserve to carry you through the hard times. Keep fixed costs low – such as your rent. Lower fixed costs mean more potential profit.
Invest in local marketing: Get your business name out there to attract more clients. Then retain customers with quality goods, exceptional service and a focus on real relationship-building.
Partner with the right people: Spend a bit more if you can to hire the right staff. Be open with your team and make cash flow management a priority for everyone. Don’t handle the financial side of the business – utilise the services of professionals such as tax experts and accountants to promote positive financial health. Build a relationship with the financial institution you partner with and ensure they understand your business mission and financial goals.