5 Steps to Effective Cash Flow Management

Cash flow is crucial for your business, so how can you manage it?

In the United States, there is a 7.4 percent projected growth from 2016 to 2026 for small-business owners. With so much growth in the next few years, it’s more important now than ever to have a cash flow management plan.

For those looking for the best cash flow strategies, check out these five important steps to effective cash flow management.

Read on to learn more.

  1. Be Aware of Your Profitability

If you want to know how to increase cash flow, the first step is to be aware of your profitability. Know where you stand financially in your business. Consider creating a spreadsheet that reflects the movement of money in the business over a quarter.

Check out how must your expenses and profits fluctuate over a given period of time and make the necessary adjustments. Consider seasonal sale changes as well as holiday influxes.

Remember to analyze each service or product you sell separately. Read more about cash management here.

  1. Try to Finance Big

One of the best small business cash flow strategies is to try to finance big. Many businesses make the mistake of using their cash flow income to purchase an expensive, long-term asset.

Think ahead and finance big at the start of the quarter or year.

  1. Don’t Forget to Speed Up Cash Inflows

Don’t forget to speed up cash inflows. Find ways of getting money into your business at a faster rate. Consider making additional charges to your customers to incentivize them to pay on time, such as charging interest to those who pay late.

Remember, electronic payments speed up cash flow!

  1. Create a Cash Flow Projection

One of the most important cash flow tips is to create a cash flow projection. A cash flow projection allows you to be aware of potential financial lows you may experience during a quarter.

Consider payments to the government, such as taxation.

Insert your expected daily, weekly, and monthly cash inflows and outflows. Remember this is just a projection, you should also track actual cash flow as it happens and compare these two spreadsheets quarterly.

  1. Have a Fallback Plan in Place

Remember to have a fallback plan in place. Even with all the best cash flow planning strategies, sometimes things don’t go according to plan. In times your business needs some extra cash, be prepared with different avenues of financing ahead of time.

Don’t forget to have both long-term and short-term financing options in your wheelhouse. Consider things such as secured loans, credit cards, and lines of credit.

Effective Cash Flow Management

It can be overwhelming to understand effective cash flow management in this day and age. Be sure to consult these important cash flow tips to help improve the success of your business today.

What are you waiting for? Your increase in cash flow awaits!

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