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Good afternoon captains of small business; we would like to direct your attention to the ensuing content of this post, as we demonstrate the proper safety procedures in the event that cash flow overcomes your business boat.

 

When you are faced with an out of control cash flow, you will either have enough cash to keep your business afloat or you won’t. This will challenge you to make difficult decisions that could capsize your success, prevent investments, and even damage your reputation with late payments and additional fees.

 

Here are 5 essential business practices that will help you keep the cash flow under control:

 

Have a Plan

Start with a detailed month-by-month budget and use it to create a cash flow plan that projects your needs. This financial strategy protects you from being swept away by unexpected expenses and affords you the financial flexibility to make the best decisions for your business.

 

Monitor

While delegating or outsourcing your accounting activities is the best choice for most small businesses, every owner needs to be monitoring the cash flow on a weekly basis in order to make quick and effective business decisions. Understanding how and when money moves through your accounts (including payments to vendors, revenue deposits, and payroll) is essential to knowing what cash you will need at any given time.

 

Manage Payments

Collect revenue from your customers as soon as possible to help shorten your cash gap (the time interval between when you sell a product or service and when you have to pay the vendor for that same product or service). Secondly, it helps your business reduce non-payment and accumulate more value as you sell. Try tactics such as: turn your product or service into a monthly subscription, collect a retainer, or offer incentives for early payment.

 

Use Credit to Your Advantage

Most businesses fall into one of three boats:  

  1. Absolutely NO credit cards aboard
  2. Credit cards cover all the company cash needs (causing more cash flow issues when finance charges accrue).
  3. Credit cards are used to pay intermittent expenses and are paid off each month (or each couple of months).

 

Boat 3 is generally the best choice for most businesses. If you have a good cash flow analysis and properly plan for the date your payment is due, you can avoid the high finance charges while still gaining free access to their money to fund your business.

 

Cultivate Strategic Relationships

Build relationships with several bankers, where one bank might not be able to help you, another one will. I was a banker and worked in financial services for 15 years. Having a banker that will vouch for you with the credit committee because she knows you, your business, and trusts that you can accomplish what you say, will go a long way toward getting you the line of credit or loan you need.

 

Bon Voyage!

You may believe that what matters most is the purpose of your voyage – the products you sell, the services you provide and how you market – but running a successful business is really about the financial fundamentals. To set your course on a healthier financial future for your business, visit our Facebook, Twitter, or LinkedIn pages to join the We Spark Growth 90 Day Boost Your Business and Your Health Challenge.

 

If all this financial talk is causing you to abandon ship, or if you are just sick of being out on the high seas alone, call in We Spark Growth! Our fleet of accountants and CFOs are waiting in the wings to shore up your business and pave the way for your growth. After all, the hard truth is that you can’t keep your business afloat for long if you don’t have the funds to do it. Use these cash flow safety procedures and rest assured that no matter what storm lies on the horizon, you’ll have the resources to take it on.

 

Full speed ahead!

 

 

 

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