No matter the success or size of your business, managing your cash flow is a must for future success. The fact is that while not all companies that manage their cash flow well are wildly successful, every business that doesn’t manage their cash flow well, typically fails.
Let’s look at a few ways you can improve your cash flow management:
Find the Break Even Point
The break even point, or the point where your business becomes profitable, is crucial to keeping your doors open. After all, the purpose of running a business is to make a profit. To find this, check out this web page for a simple calculator. Once you know your break even point, you’ll have a goal to strive for as you manage your other cash flow areas.
Don’t Focus Just on Profits
Even though we just recommended finding your break even point, profit shouldn’t be your only concern. You must also focus on the way cash moves in and out of your business – see where you’re spending the most money and where your revenue is coming from and what times of the month these transactions actually happen. This will help provide perspective moving forward and will allow you to pinpoint the times when you’re facing the most pressure on your bank balance.
Collect on Accounts Receivable
Is your balance sheet filled with net-30 and net-60’s? If so, you should do everything you can to collect on these payments. Your accounts receivable can be a burden if you fail to collect on them. Make it a point to contact these customers periodically to receive your cash sooner.
Going off the last point, while you want to speed up your cash inflows, you should try to extend your outflows of cash. See if your suppliers will allow you to extend net-30’s to net-60’s and so on. Some might charge a late fee, but it might be worth it for you at certain times.
If managing your business’ cash flows seems like a burdensome task, you should delegate it to a competent and trustworthy resource. By having a dedicated person managing your cash flow, even if just part-time, you can better track and manage your cash flow position.