How to Manage Your Small Business Cash Flow
While some entrepreneurs only focus on sales and profits, the True Resolve Tax team knows that the key to long-term success is learning how to manage your small business cash flow. For example, you just closed six big deals…but your clients are on net-30 terms and payroll is coming up in less than a week.
Do you have the cash flow needed to cover overhead while waiting for money to come in? If not, do you have a back-up plan for shortfalls, either cash reserves or some form of financing you can tap into?
Bottom line, like the name suggests, cash comes in and goes back out like the tide. It’s up to you to not only figure out currents but manage other areas of your business accordingly. If you have a handle on your cash flow, you will be able to more confidently make decisions such as:
- When to purchase or upgrade business equipment and technology
- When to hire new employees and whether they should be full or part-time
- When to hold off on purchases because an important payment is due
- When to seek out a line of credit to cover a shortfall (hint: not when you run out of cash)
- When to start padding your reserves in preparation for slower periods
Whether you own a new tech start-up or a Denver restaurant coming up on its 2-year anniversary, cash flow is king for small businesses. If you rent office space and the lease payment is due, showing that you have cash on the way isn’t going to cut it. If you owe the bank or the IRS, they want actual money, not a promise to pay when your net-30 clients finally pay up (and sometimes they pay well beyond).
So, don’t wait another day to take control of your cash flow and avoid an unforeseen cash crisis. When you know what’s coming in and what’s going out, you’ll be on your way to improving your bottom line.