The number one reason that most small businesses fail is insufficient cash flow. Even businesses that are profitable, on paper, can be forced to close due to mismanagement of their cash flow stream.
Every business has its own unique cash flow intricacies and therefore needs a personalized cash flow management strategy. That being said, here are some overall strategies that can be initiated across industries to gain additional traction in managing your cash flow.
• First and foremost, create a cash flow projection that includes all expected cash inflows and outflows. Update your statement routinely and review any significant variances between actual expenses and what you forecasted/budgeted. Be sure to include any taxes you can expect to pay.
• Invoice your customers immediately upon deliverance of a product or service. This will demonstrate your company’s receivable discipline.
• Monitor your aging accounts receivables and send out reminder notifications at least once before the invoice is due.
• If any amounts are unpaid past the stated due date on the invoice, contact your customer’s accounts payable department to request payment. If your customer does not have an accounts payable department, reach out to the client directly to inquire about the past due payment.
• If you haven’t done so already, setup an online payment processing system and send a link to that payment system in an email with each invoice.
• If you provide a service, consider collecting an upfront deposit. Some factors to weigh in deciding on the amount of the deposit are the size of the project, the familiarity you have with the client, and the timeframe to complete the project.
• Secure a line of credit to help with cash flow and any unforeseen issues that may surface.
• Set up a filing system that will allow you to organize your bills to be paid on the day that they are due.
• Setup savings accounts and use a ladder strategy for your certificates of deposit.
Again, those are general best practices that can be applied across industries. If you’d like help with your company-specific needs, we provide tailor-made solutions to cash flow management and many other initiatives. View our list of services and schedule your free initial consultation online.
