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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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Published on November 20, 2018

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

Why Your Past Prevents You from Saving Money

Are you constantly thinking about your financial mistakes?

If so, these thoughts are holding you back from saving.

I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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How to Effortlessly Track Your Spending

Stop manually tracking your spending.

Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

The Truth on Why You Keep Failing

Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

  1. Save more than 50% of your available money (after expenses)
  2. Only buy nice things after saving
  3. Automate your savings with automatic bank transfers

These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

How to Foolproof Yourself out of Debt

Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

So how can you separate yourself from the 60%?

By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

A Proven Formula to Skyrocket Your Savings

Having proven systems in place to help you save more is important, but they’re not the best way to save money.

You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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Transform Yourself into a Saving Money Machine

Saving money isn’t complicated but it’s one of the hardest things you’ll do.

By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

What are you waiting for? Go and start saving money, the sky is your limit.

Featured photo credit: rawpixel via unsplash.com

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