5 cash flow management tips for a small business
In order to maintain a positive cash flow, there needs to be clients or customers who are willing to pay into your small business for the service or products you offer.
There needs to be a constant search for new business opportunities. The best way to do this is to dedicate at least 25% of your working time to marketing and obtaining new customers. It would be best to dedicate 50% for full effectiveness.
The reason this is so important is because cash flow is not something you start and it keeps going. Very simply it is the process that takes consistency and work to keep it moving in the right direction, right towards profit.
Manage your cash flow in a way that not only keeps the money coming in, but is available when the money is not coming in. This is where many businesses mess up. They think the money is coming in, and therefore do not put as much attention into saving part of that money for more vulnerable times. Therefore, putting their business at risk.
Make sure to follow through with outstanding collectable debts. In order to do this, you need to create a billing and collection process. Small businesses do not have the luxury of a large accounting department. However, there will still need to be an assignment of this process. More money is lost for small businesses when they leave money that is sitting and waiting to be collected on.
If a negative habit of leaving billing and collections begins, it is that much more difficult to get the right process started. Therefore it is important to make sure that the steps are taken early on to prevent stagnant billing to occur.
Tightening credit requirements will also help to obtain the money from your services.This will help to prevent several past due and negligent accounts. The better a persons credit is, the more likely they will be to pay on the product or service you are offering.
However, make sure to limit the way your credit acceptance is worked out. The reason being is that there are several good buyers you may miss out on if the limit is too stringent.
Manage where your payable money is going. This does not necessarily keep cash flow coming in. However it does increase the amount of time that the cash flow is maintained. There are some things a small business needs to budget for, and there are some things that can wait.
Some things that need to be budgeted is the investments with spare money, the supplies needed to run the business, along with operating expenses. After you have taken these areas into consideration. You will find that there will be a better management of cash flow as long as you do not make whimsical purchases.
Overall these 5 tips will help to manage cash flow and increase your profits for your small business. Because that is what it is all about, increasing cash flow, and increasing the success of your business.