21 Aug Managing Your Small Business Cash Flow Part Two
Last week we looked at what cash flow is and why it’s so important for your business to keep on top of it. Having positive cash flow allows you to keep up with debt, your business to grow, and for you to be better prepared for any unexpected expenses that might come up. First, let’s just have a quick recap on last week’s tips:
- Look into leasing,
- Have regular inventory checks and
- Explore more financing options
Now let’s look at more ways in which to improve your cash flow:
Repair, rather than replace
Obviously, sometimes you need to buy new equipment to update your business but, where possible, simply repair the equipment. In order to reduce the number of future repairs, make sure you have regular maintenance on your equipment also.
This doesn’t apply to all businesses, but deposits are a great way to ensure you that can keep a part of the money should an order be cancelled during production. It may not cover all of your costs, but you won’t walk away with nothing.
Bi-Monthly pay cycle
Instead of a 26 week pay cycle, it will decrease to a 24 week cycle. Doesn’t seem like much of a difference, does it? Well, this tactic should reduce the administration costs of collecting, verifying and tabulating payroll information.
If you have a product that is regularly consumed or repurchased a few times a year, you could create a subscription service. This would allow your customers to prepay for your product and mean that you’ll have the upfront cash to cover future costs.
Don’t forget to analyse
While these are tips that should help with your cash flow strength, it is just as important to monitor your cash flow and not just assume that following these, and other tips, will help. Look into an analysis of your cash flow by a professional. This is important because many businesses go through cyclical highs and lows throughout the year. A cash flow analysis may highlight the cycles in your business making it easier for you to time when you:
- Borrow money,
- Need a certain amount of staff and
- Should boost your marketing efforts during slower times.
Don’t underestimate how easy it is to lose track of how much cash-in-hand you have. Try some of these tips and see what works for you and your business. Make sure to plan by looking at your cash flow to date and this will inform what action you should take. However, if you do feel lost, seek the professional advice of an accountant or a financial advisor. The final part of this series will conclude with apps that may help you to manage and improve your cash flow.