When it comes to your business’s cash flow, there are some things that are out of your control — when a customer decides to pay an outstanding invoice or the length of your Accounts Receivable list, for example. However, you are in control of a huge part of your business’s cash flow, and we’ve compiled a few tips you might have overlooked. In order for Profit First to work the most effectively in your business, having a firm handle on when, how much, and how often cash enters and exits your business is crucial.
Read below to learn more about what you can do to strengthen cash flow in your business.
- The more often you bill for services, the more often you have cash flowing into your business. If you only bill for services once a month, you only have a large influx of cash when those bills are due the following month. Increase your billing cycle to twice a month (or every week depending on your sales volume) to increase cash flow.
- Do you have trouble getting clients to pay bills on time? You can add late-payment interest to your outstanding bills to incentivize clients to pay by the due date.
- Do you know when you owe bills each month? Take the predicting out of paying for bills. Figure out when every monthly expense is due and add this information into a cash flow report — so you know how much money you need to have available each week.
- Automatic payments for expenses is not necessarily the better option. Did you know that most online services offer manual payment options instead of automatic withdrawals for services your business pays for every month? Switch your expenses to manual payment so you control when money leaves your account.
- Build strong relationships with your business suppliers, so you can ask for a payment extension if you are in a serious cash crunch. Everyone has been there, it’s always okay to ask.
- Know your numbers. Having the information to make predictions on where your business will be in six weeks, gives you the opportunity to make adjustments in your marketing/sales/production strategy to speed up or slow down your cash flow depending on your business goals.
- Formalize your numbers and create a 6-week cash flow report for your business. Use this report as a living-breathing document that you update as your business grows and changes week to week.
Tip Takeaways
- You have control over your business’s cash flow.
- Know your numbers, so you know what’s coming and how to prepare for it.
Take Action. Create a 6-week cash flow document. Add reviewing and updating this document into your weekly routine. It shouldn’t take more than 30 minutes once you build the foundation of your cash flow report.
Next Week! Understanding your business’s cash flow is crucial to successfully implementing Profit First. As you start to build the foundation of knowing when, how much, and how often cash enters and exits your business, it can be helpful to look at the debt you currently have or might take on in the future as part of your overall cash flow forecast and business strategy. Next week we discuss in detail what debt can do for and against your business in:
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