Managing your business’s cash flow is one of, if not the, most important task you must do. This delicate balancing act can be difficult and stressful — you have to make certain you have the money needed to run your company, pay your vendors, and pay your employees, but you don’t always collect money from your customers right away. A good business owner will be able to prioritize what needs to be paid while holding out for income. If you’re uncertain if you’re managing your cash flow well, here are a few tips.
- Make income projections. A cash flow projection for next quarter or next year can be helpful in determining how much money you will have. Of course, remember that projections aren’t guarantees. The market fluctuates in ways that no one can predict, and what seems like a sure thing can be a disaster. If you find your quarterly projections aren’t doing it, go to monthly or even weekly projections. You can’t make any decisions until you have an idea of how much cash you’ll have on hand.
- Also, be certain to know when money is going out. Track all of your expenses and make sure you’ll be able to meet them.
- There will be times when you simply don’t have the income to pay every one of your bills, so you have to know which to prioritize. You may be able to hold off on paying the office’s electric bill for a week or so, but your employees are going to expect their paychecks to be ready on time. Make a list of when a bill is due and when it’s considered late. Do your best to never be late, but remember you don’t always have to pay a bill when you receive it. Most are due within 30 days.
- Look for ways to make your business more efficient. By reducing the time it takes for employees to do tasks can give them more time to work on projects that bring in more money. Likewise, the faster products are created, the more you have to sell. Just don’t take shortcuts that lead to cheaply made materials. That can backfire.
- Consider asking customers to put down deposits when they make an order. This will give you at least some cash on hand to put towards expenses.
- If you’ve had inventory on the shelves for a fairly long time, clearance it out. Even though you may be taking a loss on it, it’s better to sell it for something than to get nothing for it.