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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 March 29, 2021

Life Insurance: A Secure Way To Protect Your Future.

Life Insurance: A Secure Way To Protect Your Future.

Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

Importance of getting a life insurance

No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

Choosing the right insurance plan

If you’re about to select an insurance plan, you should consider some important factors:

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  • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
  • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
  • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

Differences between life insurance plans

Here’s a short brief of some plan categories you can choose according to your needs:

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  • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
  • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
  • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
  • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
  • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

So what are you waiting for? Plan for your future and live a happier and carefree life today.

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Featured photo credit: aryehsampson.com via aryehsampson.com

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