3 Tips for Managing Your Cash Flow

Cash flow is the king of your business, but when not managed correctly, it can be the villain that brings it to ruin.

Many new business owners believe making a profit is the most important thing to focus on.

They must realize that profit without the cash to continue business operations is a red flag that should never go unattended.

Cash flow covers all business operations, meaning things can easily slip under your nose and go unnoticed.

Today, I will share three easy tips to help you care for your cash better.

Regular Cash Flow Forecasting

After being in business for some time, you will become more familiar with the amount of cash coming into your business and the expected payments you need to make. Get into the habit of regularly sitting down and tallying them.

Do it weekly, monthly, and yearly. You can also consider when more considerable money flows into or out of your business. Keep a record of it easily accessible to help you identify patterns. In just a few months of doing this, you will understand the cash coming in and going out of your business much better.

Build a Cash Reserve

When you forecast regularly, you will begin to see patterns in the way cash moves in and out of your business. Recognize these patterns and periods of more significant inflows of cash. Then, use this extra cash to build a reserve for periods of lower inflows.

Doing this is especially important when you have a seasonal business. Think ahead and plan how to save for periods of low cash.

Figure out what amount of cash you need to cover your basic expenses, bank loans, and salaries.

Then, make a plan that helps you to ensure that the minimum amount is always available.

Diversify revenue streams

If your business is seasonal, consider creating multiple revenue streams that complement the timeline but can use the same space, skills, and labor you have available.

For example, a seamstress may get a bigger volume of work during summer as parents prepare for the new school year, leaving the months of October, November, and December with a lower volume of sales.

As a business owner concerned about managing cash flow, you can use this time to cater to businesses in your area for making work uniforms. Consider creating special packages that motivate them to finish their uniforms during this period when you may have idle time on your hands.

Simple diversification of revenue streams like this could assist in alleviating slower months and creating a cash flow that is more balanced throughout the year.

The Challenge,

This week, I challenge you to start with the first tip and do weekly cash forecasts for your business. Doing this weekly will give you a shorter period to work with and help make the idea of cash flow forecasting much less intimidating.

Share this article with a business owner who would benefit from these tips.