Cash is king when it comes to business.

How can you expect to pay bills, debts, operation costs, and expansions without a healthy cash flow? As a small business owner, you can’t.

Despite this, we often see owners struggling to manage. Typically, it’s because of inconsistencies with tracking, analyzing, and implementing a budget.

That’s why we’ve come up with some helpful tips below on how you can solve issues with your small business’ cash flow.

1. Balance the Budget

Ultimately, it’s no secret- you want to be getting more money in than going out. But to really succeed you need a balance between 3 key areas. Your accounts receivable, payable, and shortfalls.

Accounts receivable is essentially the money that is owed to you by the customer or client. And, if they are not paying (or not paying on time), this means you don’t have enough coming in.

If you have too much coming out of your accounts payable (what you owe to suppliers) you’ll likely find yourself in a negative cash flow cycle.

But, without information on these three areas of your business, you could not be making enough to break even. Or worse, you could not even know it.

2. Plan for Emergencies

Relying on credit cards or loans for a rainy day is not something a small business owner should do. This is because it can impact your cash flow for months down the line.

But, the good news is that these alternatives can be avoided with proper financial planning and putting money towards the account monthly (regardless of how small the contribution is). Otherwise, expect to incur costly interest rates and to owe more.

3. Set Payment Terms and Timelines

When it comes to receiving payments you need to set and follow the terms. Meaning, you should know exactly how much money, when, and where it is going in a given month.

You should also have this set of terms and conditions in writing and signed by the client or vendor. This will ensure that everyone knows what is expected and what will happen if they do not pay on time.

If you are setting up an account with a client we also recommend asking for an initial deposit. This can help you to cover any necessary upfront expenses.  Or, try to encourage clients to pay early by offering a special deal or discount to kick-start your cash flow.

Finally, we also recommend setting up automatic reminders on a calendar so you are aware of exactly who and how much will be paid to you in a month.

4. Use a Financial Planner

If you don’t have anyone monitoring your cash flow you’ll be at greater risk. That’s because you won’t be able to spot inconsistencies when payments are missed. This can be detrimental to a small business, especially if the funds cannot be recovered.

That’s why we highly recommend using a financial professional, like us at A.P Tax and Accounting & Tax Services. We offer business owners an unbiased look into their accounts. This will be able to track payments to ensure your books balance at the end of every month.

5. Reduce Expenses

Another way to help increase the cash flow is to reduce some of your expenses. We recommend working with a financial professional to outline what your monthly expenses are. Without this information, you won’t know where your money is going each month so you know where to cut back.

Ultimately, cash flow needs to be top of mind for small business owners. Without proper financial planning and savvy budgeting, your business could suffer from a deficit.

If you’d be interested in learning more, or knowing what services would benefit you, give us a call at 407-328-5001.

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