Every month needs a steady flow of revenue. But if you specialize in seasonal work or contract-based projects that aren’t consistent, it can be difficult to adequately project your future revenue and profits. This is why establishing good cash flow management strategies for small business should be a high priority as a small business owner.
One of the best things you can do is organize your business finances around the concept of cash flow. Having a different focus changes your overall strategy, and that can help you find new tactics for managing your work and expenses.
Here are four ways to optimize your cash flow management strategies for small business:
Track Invoices for Faster Payment
Sending invoices manually or through multiple different portals for different customers is messy. You have to spend extra time tracking the invoice itself in order to ensure it reaches new customers. Additionally, you have to track the invoice during the time its open and send reminder notices.
If you have late payment penalties, making those changes can be difficult to track and subject to a lot of delays during audits or contestations. One easy way to attain better cash flow management is to automate your invoicing process with automatic invoice software.
These tools record your customers’ contact details and the particulars of the project. As such, you have a constantly updated record with the first date of sending and any follow-up notices. Some systems even record the read receipt of the invoice.
Be More Flexible to Different Customers’ Payment Procedures
The more payment methods you accept, the more likely your company is to get paid on time. This doesn’t mean you have to open yourself up to potentially fraudulent methods of payment.
Not having full flexibility can do more than just delay payment. It can make large or inflexible customers unwilling to do business with your company and affect your tax reports. Understanding your customers billing needs can help with determining which cash flow management strategy works the best for your small business.
Keep a Comprehensive Breakdown of Monthly, Recurring Expenses
There are a lot of helpful cash flow management strategies for small business and keeping a running log of your recurring expenses is at the top of this list. A lot of expenses are project-based, especially if you contract your labor and rent specialty equipment. But there are always business expenses that recur monthly and which don’t change based on the workload.
These expenses include certification fees, licensure, insurance, and any lease or financing agreements your company has.
Fixed monthly costs are a stabilizing influence on your monthly forecasts, even if they can get in the way during low months.
You should know the minimum monthly expense of running your business. You can then start to rearrange fees and set revenue aside for future costs.
Only Own Your Universal Equipment
Large equipment should be rented or financed instead of outright purchased. Buying equipment, especially expensive goods, ties up your company’s capital without any real value.
Instead, lease or finance large resources that are likely to become outdated or replaced with better technology in a few years, anyway. If it’s not a tool you use all of the time, it’s not something your company needs to own.
This makes leasing and financing another monthly cost, but that’s far better than losing a much larger sum at the outset. Businesses have a lot of variable costs, and even the fixed costs can be optimized to match your business.
Enhance your Cash Flow Management
One of the most important elements of good cash flow management in a business is getting the invoices closed on time.
It means you have the revenue to pay for project-related expenses. You can focus on growing your business instead of chasing down unpaid bills.
To learn more about cash flow management strategies for small business, please contact us.