Cash flow management involves balancing small business expenditures with revenue collection to ensure your company has the funds it needs to pay bills, cover unexpected expenses and generally stay afloat.
Putting together a financial plan is a crucial part of cash flow management. Depending on the particulars of your company and the industry you're in, making projections on an annual basis may be sufficient, according to Entrepreneur magazine. Quarterly forecasts are also common, but if you're really in dire straits, consider preparing projections as often as once a week in order to identify and mitigate potential cash flow logjams as soon as possible.
"As difficult as it is for a business owner to prepare projections, it's one of the most important things one can do," accountant Steve Mayer told the news source. "Projections rank next to business plans and mission statements among things a business must do to plan for the future."
While financial plans are helpful, it's important to acknowledge nothing is set in stone. Think of all the variables your business deals with on a daily basis, such as how promptly customers pay their bills and how patiently vendors are willing to wait for payment. It's also imperative to take other factors into account, such as seasonal sales fluctuations and scheduled loan payments.
The crux of cash flow management involves becoming as knowledgeable as possible about upcoming cash outlays of all sizes, from large expenditures – such as rent – to smaller payments, including the purchase of office supplies. Putting together a comprehensive list may seem daunting, but it's vital for making your projections as accurate as possible, which will mitigate the chance of nasty surprises down the line.
"Too many companies get blindsided by unfavorable movements in cash flow that are predictable if they really sat down and thought through it," Paul LaRock, a principal at consultancy Treasury Strategies in Chicago, told Inc. magazine.
Whether you're looking to set up a cash flow management system for the first time or simply get some financial tips to make your current approach the best it can be, My Bank is ready to help. Call us at 1-888-mybank4, visit mybank4.com or drop by a branch anytime.