Whether you are working on growing your current business or getting ready to launch a brand new start-up, the following tips can help you learn how to best manage your company’s cash flow at all stages of growth.
Determine What Your Break-Even Point Is
How much money will your business need to earn every month in order to pay for your essential expenses? Add up all of your recurring costs, such as payroll, utilities, rent, and other fixed or predictable business expenses. Next, develop business goals based on milestones to help increase the chances that you will have enough money in the bank to pay for all of your basic expenses.
Analyze Your Expenses and Review Your Income
If you are having problems with cash flow, the most common response that many people tend to make is to search for ways to make more money. However, also make sure to evaluate your cash outflows. Review your ongoing expenses thoroughly to help you identify “extras” that you can possibly eliminate. You may be surprised at how easy it can be to reduce your monthly overhead expense.
Don’t Allow Your Receivables To Go Unpaid
Stay on top of your invoicing and customer payments. It is critical for your customers and clients to pay you on time since incoming cash is necessary for you to be able to cover your expenses and deliver your service or product in addition to paying for your overhead expenses. Develop specific payment policies to prevent long payment time frames that can significantly delay your receivable. Assign an employee to keep a close watch on customer management and receivable to ensure that your customers make timely payments.
Establish an Emergency Savings Account
When you are first starting out, you won’t be able to anticipate when your business may slow down. It can still be challenging years later for companies of all sizes. Seasonality can cause you to get caught up in a tough spot if you do not have money saved to cover your current expenses. Get a savings account set up for emergencies. Shortfalls will occur in your business, even if you have instituted an effective plan.
Don’t Try To Do Everything On Your Own
Most business owners and entrepreneurs do not have the years of expertise or time spent on finance or accounting training to be able to manage the entire financial picture on their own. It is quite common for mistakes to happen when handling the company’s books. And mistakes made in the books might fly under the radar but could impact your taxes at year-end. If you would like to optimize your long-term results and reduce your spending, then hiring CFO services can be one of the smartest decisions that your company can make. A CFO will have the experience and insight to help you reach practically any business goal, and also help you with tax strategies and systems to help improve your cash flow.