Understanding your businesses cash flow
The all-important money! It may not be the reason you started your business but it sure does play a big part in the success of it from day one. Having consistent cash flow moving in and out of your business will keep everything running smoothly and allow for growth.
Cashflow comes in from revenue and goes out to pay for your expenses, though sometimes it feels like it's only flowing out, and fast. Businesses will have cash coming in from the customers purchasing products or services and this then moves out of the business to pay for overheads such as rent, wages, insurance, the list goes on. It seems like an easy enough concept to grasp but harder to implement.
Cash Flow is King
Cash flow is one of the biggest reasons why small businesses fail early on. More businesses fail due to poor cash flow management rather than lack of profit because cash flow is unpredictable. If getting a small business off the ground isn't hard enough, dealing with cash flow on top hundred other things on your plate can be overwhelming but don't push it to the back of your mind. Your business value depends on it!
While it may be worrying to see money rush out the door just as quick as you earned it, you should expect to see this as you pay for everything that forms the basis of your business. That's why it's so important that small business owners back themselves financially when running a business.
If you don't have the money to carry you through the beginning of your startup days a loan may be the next best option. SFE Loans can find the right loan arrangement for your circumstances and set you up for success.
Managing Cash Flow
The best way to manage your cash flow is to stay on top of where the money is going and ensure you don't hit that dreaded red zone.
- Closely monitor your revenue vs. your outgoing expenses.
- Don't purchase bulk stock, this ties all your money up in inventory that may not sell.
- Stay on top of your account management and chase up those overdue payments.
- Think about how you can reduce your overheads, whether this is limiting staff during quiet times, or switching to more cost-effective amenities.
- Chat to an expert! That's what we're here for.
Cash flow is so much more than sales. Every aspect of your business impacts it and vice versa, you could have high profits and zero cash flow! Stay informed and keep on top of everything that goes on behind the scenes in your business to understand where the money that comes in is going and where costs can be cut so that cash flow is in surplus.
Need someone on your side that can help you understand the ins and outs of cash flow and how to manage it when setting your business up for long term success? Helix Planning has you covered! Contact us or email Sarah directly at firstname.lastname@example.org.