7 Tips for Managing Cash Flow for Small Business Owners
Managing cash flow can be a tough chore for small business owners, especially when there is precious little cash to go around. Some ways that you can be innovative in handling the flow of working capital is to study market trends as much as you study your budget.
Forecast Future Needs
By looking a couple of months into the future you can tell if the season is going to be a busy one or not, especially if you have past years to compare to. This can help you budget your savings now to tide you over.
Build Lender Connections
The better you can build your lender connections before you need a loan, the easier it will be to get quick approval. This can mean taking out equipment loans during busy seasons and establishing a good repayment history with lenders.
Work Your Cash
It is a good idea to build savings into your monthly budget and put that money in an interest generating account. There are many options to choose from for earning interest and your banker can help you decide which is the best for your needs.
Train Your Customers
Cash flow problems are only impounded with customers who wait until the last day of the invoice to pay on accounts. Make sure to remind them that payment is expected upon receiving the invoice and that there are penalties for waiting too long. You also need to keep up on your invoice collecting.
Maximize Cash Inflows
To maximize your cash inflows you will want to make sure that you are getting at least partial payment upfront for large projects and charging extra for any modifications that clients want to existing products. You can even look into consumer financing options so that you are getting regular payments for larger items which do not sell as frequently.
Work With Vendors
Work with your vendors to delay payments as much as possible without incurring fees. Some vendors will even be able to extend you credit on your supplies to help ease your flow of capital.
Shrink Cash Outflows
The fewer items you can pay cash for, the better your outflow will look. This means repairing equipment instead of replacing it, delaying some upgrades where possible and even bartering for products and services wherever possible. For instance, if you own a restaurant and know a web developer who likes to eat there, then you can trade website help for meals.
Managing your cash flow is not an easy task and can include many different factors. When you take initiative and start planning ahead for potential pitfalls, you can lay the groundwork now with lenders, suppliers, and customers.
