Running a business can be fun, each sale or 'win' takes you a step closer to your business goal, your dream, retirement - whatever that goal is; you are getting closer to achieving it, yet we all experience setbacks in small (albeit, growing) businesses. Cash flow restrictions affect many small businesses from growing too quickly, cash burn rate being too high, seasonal sales, slow or long sales pipelines. All of these hinder the growth and the cash flow availability with in your business.
Our team of expert part-time CFOs have put together a few tips to ensure that your cash flow management is better prepared:
1. Keep your budgets, forecasts and accounts up to date.
This can be as simple as paying for a software to automate invoices and payment reminders. Also this should offer you a 'at a glance' view of your current cash flow position.
2. Manage your collections better.
Don't let too many invoices fall overdue, it may impact your cash flow more than your realise.
3. Manage your inventories.
Make sure that you are not sitting on too much prior to revenue / collections. If your cash flow is one-sided then it can hinder your subsequent growth.
4. Don't mix your business and personal finances / assets.
Leveraging your successful business to manage your personal cash flow such as to buy a car or boat for example, may pose negative consequences down the track when you want grow via investment, loans or even sell your business.
5. Build a cash flow reserve tailored to the needs of your business.
This can be a cash reserve placed in a separate account, locked away for emergencies. If you are lucky enough not to be in business where reserves are required, it is still good practice to do this for items such as tax payments and superannuation.
6. Monitor and review frequently.
If all else fails, get a second opinion to review your accounts and cash flow forecasts.
If by chance you have done all of the above and still find that your cash flow management plan is not working for you, do not leave it too late to take action.
Our highly strategic part-time CFOs have helped businesses increase efficiencies, inventories, moved production and gained cash flow loans for interim periods. However, leaving a situation too late may lose you your business.
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