Why You Should Always Prioritize Cash Flow strategies in your business planning.
A cash flow forecast is a vital tool for any small business, it can tell you if you'll have enough cash to run the business or expand it. It can also show you when more cash is going out of the business than in.
Projecting your cashflow can save you from over spending/over drafting, help you plan for your businesses future, assess future performance, predict future goal accomplishments, and identify cash shortages.
When you properly employ such planning, you’ll know exactly which times of the month you can expect money to be deposited into or withdrawn from your bank account. With this information, you’ll know when you actually have the cash on hand to cover your expenses. For example: Even if you’ve invoiced a client for a sizable amount of money, you can’t use that money until you actually have it, and cash flow strategies help you know just when that will happen.
What should you do if you have a cash flow deficit?
In the event of a cash flow deficit, these are some of your options:
Apply for a loan from a banking institution or individual.
Apply for a line of credit from a bank.
Speed up the collection process.
Finance the purchase of equipment through leasing or loans.
Delay payments to vendors.
Sometimes you may have a surplus of cash. That money can affect future opportunities, so you don’t want it to sit around. We recommend that you make the surplus work for you. You can do this by making short-term investments and using the money to pay off debts faster. That way, the money will benefit you through generated interest or shorter loan terms. Always consult with a professional accountant before making major financial decisions that could impact the future of your business.
Nine ways to manage cash flow
1. Don’t wait to send invoices.
2. Adjust your inventory as needed.
3. Lease your equipment instead of buying it.
4. Borrow money before you need it.
5. Reevaluate your business operations.
6. Restructure your payments and collections.
7. Monitor where your money is going.
8. Take advantage of technology.
9. Consider loan options.
If you have questions about cash flow projection or the bookkeeping has become too much for you to manage on your own, contact Check & Balance today by scheduling a free consultation! We’ll be happy to ensure your records are always accurate.