Cash Is King : Tips for Managing Your Businesses Cash Flow

Cash flow management is critical component of any business. In fact, most SMB's that fail do so because of a lack of cash, not sales. Without proper cash flow management, your business could be at risk of not being able to pay its bills, or even worse, closing its

doors. Here are a few strategies for effectively managing your cash flow:

Monitor Closely

You should be monitoring your cash flow on at least a weekly basis, preferably daily, so that you can identify any cash flow issues before they become serious.

Plan Ahead

Cash flow management should be planned ahead of time. You need to plan short-term and long-term needs so that you can make sure you have enough cash available when you need it.

Utilize Cash Flow Forecasting

Cash flow forecasting is a great way to anticipate cash flow needs and plan for them accordingly. The 13 week cash flow model is the holy grail of cash flow forecasting. It should be utilized to help make decisions about managing cash flow.

Leverage Business Credit Lines

Having access to business credit lines, such as a line of credit, can help mange cash flow effectively. This type of financing, available at banks and most credit unions, can provide you with additional funds when needed, so that you don't have to worry about not having enough cash on hand.

Manage Accounts Receivable

It is important to keep track of what customers owe you and make sure that you are collecting money timely. You can utilize invoicing software and apps to help manage accounts in an efficient manner. Consider offering discounts to customers who pay up front or within a certain time frame.

Maintain Cash Reserves

As with your personal finances, keeping a healthy emergency fund for your business can help when cash is not coming in. It is helpful to keep 3 month's operating expenses saved in order to make payroll, keep the lights on, and give yourself a chance to evaluate your operating environment.

Negotiate Better Payment Terms

Negotiating better payment terms with your suppliers and customers can help you manage your cash flow more effectively. The old adage of paying suppliers - never pay late but never pay before its due - rings true here. Being able to hold on to cash longer allows your flexibility. On the other side of the coin, as mentioned above, the sooner you can collect from customers, the better. You should try to get better payment terms from your suppliers and customers so that you don’t have to worry about not having enough money to cover your expenses.

Utilize Invoice Factoring

Invoice factoring can be a great way to improve cash flow in some situations. This type of financing allows you to sell your receivables and get paid for your invoices immediately, instead of waiting 45, 60 or sometimes 90+ days to get paid. This comes at a cost, however, as a factoring company will only buy at a discount.

Aggressively Monitor Your Expenses

Keeping track of your expenses is important for cash flow. In order for you to have an accurate picture of cash flow, all expenses have to be accurately accounted for. Timeliness is an important factor in accounting for expenses, as well. Best practices dictate only using business accounts for purchases and making sure accounts are reconciled often,

By implementing these strategies, you can ensure that your business has healthy and positive cash flow. By monitoring and planning for the future, you can make sure that your business stays on track. For help with understanding, monitoring, and planning contact Bubble Rock Advisors, LLC.