Learning how to manage cash flow is part science, part art form, and when done efficiently can power you towards your goals while enhancing your business growth. This is simply a fact.
To help you avoid putting your company at unnecessary risk we've put together some cash flow "errors" to avoid when handling your companies hard earned money.
Being mindful of these errors will empower you to take your company to the next level.
It's sometimes easier to make finishing a 'job' a greater priority than invoicing and receiving payment for the job.
Yet, this may have a devastating impact on cash flow, especially if you end up regularly questioning who has and has not paid you. The simple reality is that if customers receive an invoice late, they're far more likely to overlook or postpone their payment.
Look at laying down a rule to always bill the moment a project is complete. Or, consider billing a 50% payment upfront.
Growing too fast - too much too soon
While it's natural to want to grow your business, care must be taken to have a development strategy that does not suck up cash you don't have. It might be a false economy otherwise.
It may seem like a peculiar paradox but expansion can be a bit of a Trojan horse - problems can disguise themselves inside opportunities. Once you are clear about the potential challenges, then you are in control.
Developing your business should always be an aspiration but be sure you have the capacity to do it efficiently
Your cash flow plan has to be an integral basis for your business, to maintain a very clear image of your anticipated revenue and expenses. Make use of a cash flow forecast to keep an eye on day-to-day transactions and identify patterns around how your earnings and expenses are shifting.
If you would like a comfortable degree of funds to play with, it pays to regularly create and upgrade your cash flow forecasts.
Estimate your expected revenue and take down the amount and date of upcoming cash outgoings.
To make things clearer use another line for each significant cost on your cash flow forecast. Try not to be too optimistic (it is worth it to be on the conservative side when deciding cash flow) and utilize historical numbers and data to assist your "guesstimates".
And, if your business is influenced by seasonality (Christmas, Summer and so forth), be sure that you build those fluctuations into your calculations too.
Regularly reviewing your expenses will help you to see the possible return on everything you spend, while helping you refine any unnecessary spending.
This should include rent, wages, salary, taxes and debt payments. A fantastic way to determine how you're spending in comparison to other companies is to compare your business against competitors and businesses of similar size in your business, to demonstrate the way your spending looks on a broader scale.
Coming to grips with money flow management is a massive step in moving your business to a place you feel comfortable with.
Good luck with your growth.