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5 Hacks for Managing Your Business Cash Flow

5 Hacks for Managing Your Business Cash Flow

Above all else, every business needs cash to survive. Not IOUs or intangible assets, but cold hard cash sitting in your bank account that your business can use in an emergency. A small business owner must manage their cash flow to ensure that the business has enough money. Banks will not just grant a loan to small business short on cash like they might with a larger corporation, so creating a positive cash flow is one of the most important things a business owner can do.

Fortunately, a lot of the steps towards maintaining a good cash flow are fairly intuitive. Here are some basic steps which every new business should do to ensure a solid starting cash flow.

Prepare a Cash Reserve

Murphy’s Law is a thing. It always seems that it is right when a business has negative cash flow that it gets hit with sudden emergency expenses or a loss in revenue. But if your business can save money during prosperous periods, it will have a cushion during tight periods and ensure that negative cash flow is not an immediate, catastrophic crisis.

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Knowing how much cash reserves your businesses should hold onto at any period is tricky, but a general idea should be to keep somewhere between three to six months’ worth of operating expenses. That number can vary a lot depending on factors such as what stage a business is in as well as whether it is in a more volatile industry or not. Entrepreneur has an excellent guide on some of those potential factors.

Conduct sales forecasts

Sudden emergency expenses are inevitable for any business. But all too often, these “sudden” expenses or drops in revenue are really things which a forward-thinking business should have anticipated in advance. As an obvious example, many stores will see reduced income in January as the holiday season comes to an end.

Every business should look at past sales and expense numbers, identify problematic periods during the year, and create a forecast which will provide a rough estimate for how much your business can expect to earn during the coming months. You cannot completely simulate the future and there will always be surprises, but gathering information and making predictions in advance can ensure your business is ready to handle new challenges.

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Pay bills on time, but not early

You may feel responsible when your business pays its bills in advance, but remember that time is money. There is no reason to pay a $500 bill now instead of paying $500 when the bill is due next week. If something urgent happens during that week, that extra $500 could help stave off any immediate emergencies.

If you intend to pay a bill in advance, talk to your creditor and see if they will give you a discount if you pay in advance. Similarly, you may want to offer a discount to customers who pay you early. It is often better to have cash in the bank now as opposed to waiting for a customer to pay you a somewhat larger sum eventually.

Get an Accountant

Practically no business owner wants to stare at financial numbers all day. While you may be tempted to save money by doing your business’s finances yourself, you may end up making more mistakes than a professional or losing morale by the drudgery that can be bookkeeping.

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A business accountant can help your business so much more than by merely tracking expenses. Accountants can offer you additional financial advice beyond managing your cash flow, help you lower your taxes and expenses, and let you focus on the parts of running a business that you like. If you cannot afford a full-time accountant, then get a part-time bookkeeper who can still organize your business’s finances for a few hundred dollars per month.

Slash expenses

Ensuring a positive cash flow is not just about getting as much money as possible, but ensuring that your business does not waste money as well. While slashing costs to the bare minimum may not always be the best move for your business, there is always fat that you can trim to improve your business’s bottom line and cash flow.

Some possible methods to reduce expenses include buying used equipment, not always going for the latest in technology, and employing content or social media marketing over traditional advertisements. The Houston Chronicle has a few other examples of how a business can try to slash costs without negatively affecting worker productivity or customer service.

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Managing your cash flow requires preparing in advance, knowing what areas your business is struggling to make money in, and ensuring that your business is paid in time and costs are low. But if you work on keeping cash on hand, this will ensure that your business always has a cushion during more troublesome times and can keep afloat while less cautious competitors fail.

Featured photo credit: Sean McMenemy via flic.kr

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Last Updated on April 3, 2019

How to Nix Your Credit Card Debt in Less Than 3 Years

How to Nix Your Credit Card Debt in Less Than 3 Years

Debt is never a fun thing to be in. But, there are many actions that you can take that will help you rid yourself of the burden of debt once and for all.

By coming up with a set plan, eliminating your debt can feel much easier than constantly thinking about it.

This post will provide some tips on how you can do this to help you nix your credit card debt in less than 3 years.

Hint: there are ways that are easier than you think.

1. Consider Consolidating Multiple Credit Cards If Possible

This may not be applicable to you, but if you have multiple cards – it is something to consider. Keeping up with multiple bills is time consuming.

It will depend on the balance you have on each. Consolidate ones you can but do not do it to the point that you get too close to the maximum limit. Also, it is ideal to pick the card with the lower interest rate.

Consider if there are any fees or alternatively, rewards, with transferring a balance to another card. Watch out for fees. Note that some cards offer rewards for transferring a balance to them. This is extra cash that can help go towards paying off your debt.

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Having one or two cards can make nixing your debt much simpler than keeping up with the balance of a bunch of cards. Keeping track of paying the minimum towards a bunch of cards is time consuming. Spend the time to consolidate instead to make the overall process simpler going forward.

My tip: Have one main credit card. Have a second one that you use for necessities – such as groceries or gas – that offers rewards for those purchases (a lot of cards do) and set the second one on auto-pay. You should be able to pay off a smaller amount on auto-pay if it is a necessity. If you think you cannot, then you may need to cut down a lot on expenses.

Why do I suggest doing this? Having one thing set to auto-pay is one less thing to think about. One less thing to waste time on. Same idea with consolidating to one main card. Tracking down too many is a hassle.

2. Try to Pay the Full Balance You Spent Each Month at the Very Least

You need to pay off the amount you are spending each month when that bill comes in. This is the amount you spent THAT month.

Do not let the debt keep accruing while you work on paying any unpaid debt that has accrued. It will become a never-ending battle. Try as best as you can to be current on paying for each month’s expenses when that month’s bill comes out.

If this is a strain, consider why. You may need to cut expenses. Or you may need to consider other cards. Or look at where this money is going.

3. Pay Extra When You Can – Every Small Amount Counts

This cannot be emphasized enough. If you are looking at a lot of credit card debt, it can look daunting, but each extra amount that you can put towards the debt will really add up – no matter how small it is.

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It does not just reduce the principal amount that you have left to pay off, but it reduces the amount that is collecting interest. You will always save money with that reduced interest.

4. Create a Plan on How to Pay Extra

Back to the main point, having this plan is giving you one less thing to think about.

This plan should be a plan that works for you. If it does not work for you, your spending habits, and your views on debt, then it will not be an effective plan.

For instance, if a set plan of an extra $50 (or another amount that you know you can afford) works for you, then do that. Set that aside every month and pay that extra amount. Treat it like a bill. Choose an amount that works for you and pay it like clockwork as though it was a bill you had to pay each month.

Little amounts will not nix it entirely, but they will help tackle it and having a set plan can make it less of a chore. Creating a new plan of how much to put towards it each month is an unnecessary added stress.

5. Cut out Costs for Services You Do Not Use

If you are signed up for subscriptions that you do not use because of some free trial or for some other reason, cut it out. Your overall financial position will look better.

In turn, that will make cutting your credit card debt easier. Look at your statements to find these expenses. If you do not use them, you may forget you are paying some unnecessary amount each month. Cutting it out can really add up in savings that you can put towards other needed expenses.

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6. Get Aggressive About It

Consider these points:

Depending on the interest and the level of debt, you may need to give up a few indulgences. For example, instead of ordering delivery or going out to eat, cook at home. Everything adds up.

Other things may be more of a sacrifice. It may be a trip you wanted to go on, or a daily latte habit you’ve picked up. In these instances, consider how important it is to you and if it’s worth the sacrifice. And if it is a costly expense, think whether you can wait to indulge.

Cutting an extravagant expense can really help make a dent in your overall debt. Try not to add to debt when you are trying to pay it off. It will be a never-ending battle. Make it less of a battle with these tips and it will feel easier.

Bottom line: Do what you can to make this process easier for you. Implement steps that do this. It takes time now, but will help overall. Also, keep track of your spending and paying down of your debts. Which is the next point.

7. Reevaluate Your Progress at Set Intervals

Doing a regular check-in can help you see your efforts pay off or maybe indicate that you need to give this a bit more effort. If you check every 3-6 months, it will not feel so much like a chore or feel so daunting.

By doing this, you will be able to better understand your progress and perhaps readjust your plan. Bonus: if you see it pay off, it will feel great to do this check-in. You will get there.

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Finally (and most importantly)…

8. Keep Trying

Do not get discouraged. Pushing it off will make it worse. Just keep trying.

Once your debt becomes lower, each monthly payment will reduce the balance more. Why? You are paying less towards interest. It will be a snowball effect eventually and it will become much easier to manage. Just get to that point. And know once you do, it will feel easier and motivating.

Start Knocking out Your Debt Today

The best way to eliminate debt is to get started right away. Begin by implementing the above steps and watch your debt just melt away. Try out some of the above strategies and see what works best for you. Soon you’ll be on your way to a debt free life.

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Featured photo credit: Pexels via pexels.com

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