- Controlling cash flow is crucial to the success of any company, but especially small businesses as they're trying to grow.
- This can be challenging without the proper tools and guidance.
- By taking steps like controlling debt and doing a regular audit, businesses can keep their cash flow positive.
No matter what business you're in, money matters.
"The most critical consideration for the financial security, stability, and growth of your company is the control of cash," US Small Business Administration says.
But keeping your cash flow healthy can be a real struggle. And managing that cash successfully while building a company is especially challenging for small-business owners.
So here are a few hacks for keeping your business' cash flow positive.
1. Know your numbers.
The most critical aspect of cash flow management is knowing where you stand. Consistently keeping a finger on the pulse of your business' money lets you spot issues early, sidestep obstacles, and identify opportunities.
Always remember: It is your business. So even if your books are managed primarily by someone else, stay current. Have your financial pro generate reports that matter to your company. Review your cash flow statement regularly and get clear on how much money is coming in and going out.
2. Plan expenses.
It's not enough to know where your funds have gone; you'll want to prepare for upcoming costs too.
Start with your recurring expenses, like rent, utilities, and payroll. Don't forget the less frequent costs, such as semiannual insurance payments or annual web-hosting fees. Then account for those one-off but anticipated costs, like that new printer you're bound to need in a few months.
Finally, build a healthy buffer into your cash reserves. It's completely normal for cash flow to vary over time. Maybe your business is seasonal, you're hit with a surprise expense, or it's simply a slow month.
Whatever the cause, you'll want cash on hand when your business needs it. With a solid safety net in a bank or credit union, you can tap those funds to support your company instead of dipping into debt.
3. Make sure you're getting paid.
You're working hard, so keeping your cash flow healthy means getting paid on time. Set up a foolproof system for sending invoices and tracking payments. Invoice promptly and designate a payment window that makes sense for both your industry and your company.
Ensure that your invoicing system or appointed representative sends automatic reminders when payments are due. Trouble collecting? Pick up the phone and talk to a person in your client's accounts-payable department.
If you're providing long-term services, consider a multiphase payment structure. Build into your contract an upfront deposit, and partial payments due when specific milestones are reached.
Simplify life for you and your client by making payment collection easy. Incorporate smart terminals and mobile readers into a physical business. Set up phone ordering, email invoicing, and credit-card payments.
4. Complete an expenses audit.
Unnecessary (or unnecessarily large) expenses can rapidly eat into a healthy business' cash flow. So make a point of sitting down at least once a year to review each of your company's expenses.
- Which expenses do you no longer need?
- Which ones aren't worth to you the amount you're paying?
- Which could be replaced with cheaper or better options?
- Which debts can you pay off or refinance with more favorable terms?
- Should you replace equipment leases with outright purchases?
- What new expenses would be smart to take on at this stage?
As you review your costs line by line, look constantly for opportunities to maximize the value of each dollar you're spending.
5. Be proactive about taking on debt.
Here's what you don't want: a sudden cash flow problem, like an unexpected tax bill, that sends you scrambling for whatever financing you can get. Instead, set yourself up now with access to credit, so that it's ready to go whenever you do need it down the road.
Look into a line of credit or a small business loan for your bank or credit union. And get a trusted business credit card to tuck in your wallet. Using a card helps you track and organize your expenses and can help in a cash flow pinch. So, it's important to choose a business card with plenty of valuable benefits and unlimited rewards.
Ready to get a leg up on your company's finances? Learn how Capital One® can help you manage your small business' cash flow.
This post was created by Insider Studios with Capital One.
