Tips for Managing Your Business’s Cash Flow

Managing_your_business_budgetHow an entrepreneur handles his or her corporate finances is one of the best ways…

…to determine whether a business will flourish or not.

Statistics show that if you want to stay in business, you’ve got to get your cash flow under control.

It can be challenging for a small business with fluctuating revenue, but the sooner your cash flow becomes transparent, well-managed, and easy to track, the better your company’s chances of long-term survival.

Fifty-one percent of Canadian small and medium-sized businesses (SMEs) claim that cash flow is a serious challenge. These numbers correlate closely to the number of SMEs—49 percent in Canada—that fail within their first five years.

If your company’s finances could be in better shape, follow these tips to improve money management:

1. Don’t pay all your bills at once.

This probably goes against your better judgment, but it’s a truly sound small business management method. Think about it this way: If you use most of your on-hand funds to pay utilities, vendors, and employees all at once, how will you advertise or deal with unplanned expenses?

Instead of writing a pile of checks and mailing them all at the same time, consider pre-dating them and mailing them in staggered order. You can also schedule staggered payments directly with your bank.

2. Fine tune your accounting system.

One in three businesses across Brazil, Canada, Mexico and the United States have outstanding invoices, at least three months old. Late payments hurt both your company and any vendors that are depending on payments from you.

They break trust between two parties and encourage people to look elsewhere for business. To avoid these issues, fine tune your accounts to operate on a schedule, both for making payments and sending invoices.

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3. Outsource payroll professionals.

Payroll is a complicated process that involves specialized knowledge of taxes, pensions, health care plans, and many other factors. You and your regular staff are unlikely to have the time to learn how to do it properly, which makes outsourcing a great option.

Let the experts take care of employee payments to keep cash flow as transparent and well-executed as possible.

If necessary, work with your payroll provider to create a staff payment schedule that makes the best use of your regular on-hand funds. Bimonthly payroll may be an

option that causes less strain on your bank account.

4. Stop using tax money like revenue.

As you collect sales tax on purchases made from your company, you need to deposit the money into a bank account separate from your operational funds.

Avoid the temptation to use the money just to make things flow a little smoother for now it will be much tougher to find the money to pay come tax time if you don’t keep it separate. You’ll also risk incurring penalties because of late payments.

5. Raise prices to cover processing fees.

Sixty-nine percent of Millennials will not spend money with your company if you only accept cash. If you accept credit card payments, you stand to make more sales, worth higher value.

That’s because people paying with credit cards spend 12 to 18 percent moreProduct creation than if they had used another method.

Setting up a merchant credit card account costs money, as does the continued service.

To cover the service fees, raise your prices, this way all credit transactions will be pure profit and much easier to calculate on any accounting system.

6. Ask for payment deposits.

Late payments from clients are a common issue that exacerbates an already struggling small business budget. You can alleviate the strain by asking for a deposit up front for any service you provide.

7. Get a line of credit before you need it.

When things get tight, it’s the worst time to ask the bank for a loan or a credit card. Instead, plan ahead and obtain business credit while your finances are well balanced.

Nobody wants to loan money to a business owner that can’t handle his or her finances and waits until the last minute to figure out how to pay the bills.

8. Forecast cash flow for the upcoming months and years.

You’ll never be able to solve the problem if you can’t see where it is. Sit down and get your accounts in order so that you can write a reasonable cash flow forecast for the upcoming weeks and months.

When you see issues, fix them. Are expenses outgrowing sales? Trim them. Is one customer consistently late in paying? Consider trimming that person, too.

9. Lease, don’t buy.

When you need new equipment to expand the business—computers, tablets, printers, manufacturing equipment—obtain it on a lease. The primary and recurring costs will be much lower than if you purchased the equipment, keeping strain off your cash flow.

Keep a careful eye on your finances at all times!

Ninety percent of companies in Europe, the Middle East, and Africa don’t have a transparent view of their cash flow. This inherently weakens their entire business and sets them up for failure in a cash flow crunch. You can do things much better!

The essence of opening your own business is to provide yourself with a new income stream and increase your cash flow. If your finances are not adding up and you’ve been recklessly managing your expenses and revenue, it’s time to learn how to rectify the situation

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