It makes sense that air traffic controllers don’t allow 100 planes to land at the same time. Airports keep a tight schedule of arrivals and departures for good reason. Sure, it saves the sanity of everyone from flight attendants to travelers, but it also saves lives.
The same can be said for small businesses owners who know that cash flow is the heartbeat of their business. Without finding ways to balance expenses that have yet to be paid (Accounts Payable) with income for which payments have yet to be received (Accounts Receivable), there is simply no way to keep your small business in flight.
It is pertinent for any small business owner to understand how cash flow affects their business. That knowledge is not only necessary, but it is empowering.
Because ups and downs will happen. Opportunities will come and go. But knowing a few simple tips for being prepared for hiccups when they do happen can help stabilize the roller coaster ride that is managing income versus expenses:
- Know your position at all times. Step one to managing the cash flow of your business is knowing the key players. Understanding what is going out and coming in every day, week and month is good for business. It helps prevent overspending while simultaneously encouraging cutting unnecessary costs. Seeing the bottom line on things like how much toilet paper you’re purchasing on a regular basis helps prevent surprises, but also provides opportunities to trim costs (maybe try the generic brand?), which ultimately can help cash flow in the long term.
- Schedule monthly payments by priority. The average person doesn’t sit down and write out all their monthly bills at once, nor should you as a business owner. Managing what goes out when can help keep an otherwise unruly month under control. It may help to break down expenses into categories like “must pay now” or “flexible financing” to keep everything organized.
- Partner with professionals. Everyone’s reasons for starting a business are different. Yet it’s safe to say that in most cases, small business owners did not get into business to crunch numbers. While it is necessary to personally and professionally have at least a basic understanding of a business’ financial situation, it doesn’t have to take away from what a person went into business to do. That’s where professionals come into the equation. Investing in a payroll service to manage payroll and sales taxes can save you time and money trying to figure it out yourself. Having someone you trust at your financial institution is also a good idea, as bankers can lend valuable insight when it comes to creative ways to help keep you on track.
- Prepare for the unexpected. Bad things happen to good small business owners every day. But those rainy days shouldn’t be reason to close any business’ doors. Having a back-up or contingency fund set up is always a good idea, even if it seems cumbersome to maintain.
- Stay organized. Staying organized and having a strong system in place for managing the finances is one of the most important foundational structures within any business. In this day and age, apps and online tools abound for small business owners. There are all sorts of ways to be more efficient and manage time more wisely, which ultimately helps the bottom line.
Your business is your passion. Keep it in flight by knowing where your finances are at, but also by staying organized, being prepared and partnering with the right people who can help.
For more tips and tricks on managing your cash flow, contact the professionals at Cloud Friday today.