Managing Cash-flow for Small Businesses
- on 05.16.12
- Investing
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When you are running and operating a small business one of the most challenging aspects is to maintain a sensible cash-flow so that you are investing wisely but always have a little bit left over for those unforeseen emergencies. For all businesses cash-flow can be the biggest cause of failure, even if you are generating a great level of regular income, a temporary cease to your outgoing expenses could mean that you have to stop trading, possibly even permanently. We all get a lot of practice at this to a small extent with our personal accounts; a sudden emergency should be manageable without it meaning that you cannot eat between now and payday. So here I will detail some different tips which can help keep track and control your expenses and income.
Measuring and Projection
An essential way to improve your cash-flow is to look at how it is weak and most importantly when. Most people experience a bit of a dip near the end of the month whilst they are waiting for the next big income or even near the end of the fiscal year as you are paying tax or waiting for next year’s budget to come through. But plot out your predicted expenditures and your income for the next quarter or year based on real figures and experience of payments and expenses. These projections will not be exact and there will always be unforeseen circumstances, but it is important to know when you are at your weakest financially so that you can prepare and take steps to combat this.
Business Directed Investment
When it comes to expenditures there are several choices that you can make when you have what is called a slush fund, or disposable income. This is where you have the opportunity to re-invest into your business in a variety of different ways. The two main areas for development are to increase the quality/quantity of stock or to improve your marketing strategy to get the word out about your business. The first one can be very valuable, an improved quality will always attract new customers through word of mouth and your existing customers will feel rewarded for being loyal. On the other hand, marketing is a massive part of modern-day business and is absolutely vital to the success of any business. It is a huge subject, but it is important to remember that advertising is only one part of marketing, and this practice does not accommodate for business-to-business marketing that can improve the relationship between you and your clients. Promotional business gifts can be a great strategy for improving this type of relationship and are a valued investment for any business.
Surviving When You Are Short
There will almost inevitably be a point in your trading life when you do not have the money to pay for certain vital expenditures. This is usually part of operating a small business and is to be expected, it does not mean that you are ruined, it can be a temporary setback, but expected is the vital element because if it is expected,
it can be prepared for. It is much easier to prepare for this eventuality and set up systems to get yourself out than it is to try to struggle out of it once it has happened. You can ask your suppliers and expenditures for a smallgrace period on payments until you are back on your feet.If you are a loyal customer with a close relationship, they will understand and it is in their interest to help you out. One expenditure that you cannot justifiably missis the payment of employees,
you will find that even your most dedicated employees will leave very quickly as a matter of necessity – they all have a personal cash-flow and if you don’t pay them they won’t be able to afford the cost of living. A useful strategy can be to set up a line of credit with your bank, this works a lot like an overdraft and allows you to borrow up to a certain amount at short notice. It is better to do this sooner rather than later as organising credit when you are financially secure is much easier than trying to borrow when you are in trouble.
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