As a small business owner, your cash flow is the lifeblood of your success. But why is managing cash flow important?
Your cash flow determines your ability to keep the lights on, make new investments, and pay your staff. However, proper cash flow management is often easier said than done.
Around 61% of all businesses struggle with cash flow, struggling to pay vendors, service debts, and spend less than they make. Staying in the black is essential, so read on to find out exactly how to manage cash flow.
Use a Bookkeeper
This is one of our most important cash flow management tips. If you are trying to manage all of your incomings and outgoings on your own, you will make mistakes.
Smart business owners always use a professional bookkeeper for managing cash flow. A bookkeeper will monitor all of your finances and tell you how to budget accordingly.
They will issue invoices on time and ensure that you pay your bills at the right moment. You can learn more here about what a local bookkeeper can do for your business.
Pay Your Bills Strategically
No matter the shape or size of your business, you will have a lot of bills. You will need to pay suppliers, vendors, landlords, contractors, and staff.
The best way to meet your obligations is to pay bills strategically, according to priority. Do not try to pay all of your bills at once.
This could drain all of your free cash and make it difficult to maintain relationships with your vendors. Don’t hesitate to speak to your vendors to work out a payment plan that fits your actual cash flow.
Manage Your Inventory
Your inventory will be the largest drain on your cash flow. You should always practice proactive inventory management to ensure that you are not wasting money on low-demand items.
Audit your sales to see which items are selling poorly.
Your best bet is to sell these at discount prices and not restock these items once they are gone. By maintaining a lean inventory of higher-demand items, you can ensure that you make more money back from every dollar you spend.
Don’t Wait to Borrow
Some first-time business owners are overly wary of credit. However, this is a dangerous mistake to make. If your business is booming, now is the time to apply for a line of credit.
These can provide you with an essential cash injection if you need money for emergency expenses or new investments. If you wait until business is bad to apply for a line of credit, you are much more likely to be rejected.
Nearly every business, large and small, relies on credit to succeed. Do not lock yourself out of the credit market before you even get started.
Better Cash Flow Management for 2022
With competent cash flow management, there are no limits on what your business can achieve.
With proactive management and a little bit of professional help, you can ensure healthy finances and better chances of long-term success.
For more tips on better cash flow management, we have got you covered. Make sure to consult our Business Education guides for expert tips and insights.
