Congratulations! You and your business have survived several months of massive changes in our world… and in your operations. That is certainly a feat worth celebrating.
As you move forward from this challenging season, what should you as a business owner be doing? There are multiple answers to this question, but one of the most important keys to your continued success will be managing cash flow.
Did you know that cash (or rather, lack of it) is the second leading cause of small business failure? Here’s what you can do to keep your cash on track:
Increase sales and collections.
Cut expenses.
Set aside money for future obligations.
Get your records in order.
Plan for the worst, best, and mid-case finances for the next six months.
Increase Sales & Collections
Obviously, increasing your sales will help your bottom line, but what if your customers don’t pay when they receive the product or service? What if they haven’t paid after the due date? Your relationship with your customer is important - so try a few of these options:
Automate invoice reminders and/or statements. This takes the personal element out of it.
Offer partial payment options. Your customer might be willing to pay $100 a week instead of $400 a month.
Review invoice terms. If you don’t have a written agreement, consider changing terms to a shorter period for future invoices.
Cut Expenses
Look at every payment and credit card charge you are making. Do you use it? Do you need it? Could you postpone the purchase?
Save for the Future
Open at least one other bank account and regularly set aside a percentage of your sales. Save some money for taxes, future large inventory or equipment purchases, and annual expenses. You’ll thank yourself for it later. There are multiple systems to do this; however, we are big fans of the Profit First method. This will also help build a cushion for future downtimes.
Get (and Keep) Your Financial Records Straight
When your financial records are in order, you can make better decisions about all of the above. We know that so many other tasks demand your attention, but be sure to set aside time for the important, but not necessarily urgent, things. (Hint: we know where you can get help with this!)
Plan For The Future
Do estimates of best, worst, and mid-line projections. Use this information to prepare for the future. Figure out how much money you need to come in to survive, which purchases are optional, and what you need to save for the future.
Your success as a business depends on a lot of factors - many of them unknown. Take just a little time to put some control into your cash by managing it, instead of it managing you!
If you need some ideas for building a cash reserve during a challenging season, check out this previous blog post.
