As a small business owner, being proactive about managing your cash flow is essential.
This means making sure you have enough money coming in to cover your expenses and that you are not spending more than you can afford.
Here are 8 tips to help you stay on top of your cash flow
Let's go over 8 of the best tips for managing your cash flow:
- Make a budget & stick to it
- Keep track of all expenses
- Get paid upfront
- Use a credit card
- Use an invoicing software
- Negotiate better terms with vendors & suppliers
- Plan for seasonal fluctuations
- Pay bills strategically
Make a Budget & Stick to It
Making a budget and sticking to it is the first step to staying on top of your cash flow. Without a budget, you cannot know how much money you have coming in and going out each month. This can lead to overspending and being unable to pay your bills on time.
Creating a successful business budget will help you track your expenses so that you can make changes if needed. It will also help you save for future goals, like a down payment on a house or a new car. The best way to make a budget is to list your monthly income and expenses.
Be honest with yourself when creating this list and be realistic about what you can and cannot afford. Once you have your budget created, stick to it! This may take some willpower initially, but eventually, it will become second nature.
Keep Track of All Expenses
One of the best ways to stay on top of your cash flow is to keep track of and manage your business expenses. This means tracking every penny that goes in and out of your account. It may seem like a lot of work, but it will be worth it in the long run.
There are a few different ways to track your expenses. You can use a spreadsheet, a budgeting app, or even pen and paper. Whichever method you choose, be sure to update it regularly.
One of the benefits of tracking your expenses is that you can see where you are overspending.
This can help you to cut back on unnecessary spending and save money.
Another benefit of tracking your expenses is that it can help you to identify areas where you can save money. For example, if you notice that you are spending a lot of money on food, you may want to start cooking at home more often.
Overall, keeping track of your expenses is a great way to stay on top of your finances and ensure you are not over budget.
Get Paid Upfront
One way to ensure you always have enough money is to negotiate upfront payments for your services.
This means you won't have to wait until your clients pay you; you'll get the money in hand as soon as the work is done.
Not only does this ensure that you always have money coming in, it also builds trust with your clients and shows them that you're a reliable business partner.
There are a few ways to go about getting paid upfront. You could offer a discount for those willing to pay before the work is done or set up a payment plan where clients pay in installments.
Whatever method you choose, ensure that you clearly outline the payment terms in your contract, so there are no misunderstandings.
Getting paid upfront is one of the best ways to ensure your business stays afloat, especially during those early months when cash flow can be tight. Building trust with your clients and proving that you're a reliable business partner will make it easier for them to do business with you in the future.
Use a Credit Card
A credit card can be a great way to keep your cash flow in check. By using a credit card for your regular expenses, you can create a buffer between your income and your out-of-pocket costs.
This can help you avoid overspending and keep your budget on track.
When choosing a credit card, be sure to compare interest rates and fees. Look for a card that offers a low-interest rate and no annual fee.
Keep in mind that it's important to pay off your balance every month. This will help you avoid accruing interest and keep your debt under control.
Damian Brychcy, COO of Capital On Tap says “The single piece of financial advice I'd give to any small business owner is to be prepared before the economy goes south. I think the number one thing you can do is have access to one or two lines of credit that stay open that you don't have to use, but that if you had to, they are there and ready. The worst thing to do is when things get bad to start looking then.”
Use an Invoicing Software
Invoicing software can help you keep track of your cash flow by automating the invoicing process and tracking payments. There are several different invoicing software options available, so be sure to research which option will best fit your needs.
Some software options allow you to create invoices, track payments, and even create reports that show how much money you've earned and spent over a given period.
This can be a great way to keep on top of your cash flow and ensure that you're always making money!
Negotiate Better Terms With Vendors & Suppliers
When it comes to staying on top of your cash flow, negotiating better terms with your vendors and suppliers is a key strategy.
This means getting discounts on the goods and services you purchase and extending payment terms, so you have more time to pay your bills.
If you can negotiate a lower price for the items you need, you'll have more cash available to cover other expenses. And if you can get suppliers to give you an extra week or two to pay your bill, you'll avoid having to scramble to come up with the money at the last minute.
So don't be afraid to ask for better terms — most suppliers would rather get something than nothing, and they may be more likely to work with you if they know you're a valuable customer.
Just be sure to stay within your budget and never agree to terms that will put you in financial difficulty.
Plan for Seasonal Fluctuations
Planning for seasonal cash flow fluctuations can help you avoid surprises when business is slower during some parts of the year. For example, if your sales are slightly lower in the summer, you can adjust your budget by saving more money during the busier months.
Alternatively, if you know that you tend to have more expenses in the winter due to increased heating costs, you can plan for that by budgeting more for those months.
By taking into account seasonal fluctuations, you can help ensure that your cash flow is as consistent as possible throughout the year.
Pay Bills Strategically
The final tip to staying on top of your cash flow is to pay your bills strategically. This means analyzing when each of your bills is due and budgeting your money accordingly.
For example, if you know that your rent is due at the beginning of the month, try to save up enough money to cover it by the time it's due.
Alternatively, if you know that you have a big purchase coming up, like a car payment, try to make smaller payments in the weeks leading up to it. By being strategic with your bills, you can avoid surprises and control your finances.
Executive Wrap Up
Managing your cash flow is essential for running a successful small business. By following these tips, you can ensure that your finances stay on track and that you're always making money.
From choosing the right credit card to negotiating better terms with vendors, there are plenty of ways to take control of your cash flow and keep your budget in check.
Do you have any questions about managing the cash flow of your business? Let us know in the comments!