Steady cash flows have allowed your business to maintain its day to day operations. As the owner, you have your own set of obligations – from paying your vendors, contractors, and employees with salaries to tending to repairs, bills, and unexpected expenses.
Managing cash flows is tedious for every budding entrepreneur – you never know when your next cash flow installment is coming in. As soon as you’re skin deep, you may realize you would be better off if you could connect with your cash flows and understand the dynamics of managing every transaction.
With an arduous mission statement and envisioned goal to follow through, your next step, as an entrepreneur is to learn how to manage your business cash flows.
Mentioned below are seven ways that can help business owners stabilize their business cash flows – income strides and timely/untimely expenses.
Understand your business expenses
The first step of stabilizing your cash flows is to understand the ins and outs of your business expenses by making a robust budget. Align your budget with the data of the current sales’ growth of your business so that you can assess the cash inflows and outflows of the company.
The second step is to draft your business expenses, including the payroll. Your budget should cover every business expense in the book – from accounting, bookkeeping, and legal paperwork concerning taxes and insurance to brand development such as marketing, inventory, and labour.
Once you make your budget, you should realize that there is always room for improvement. Try deducing each business expense to discover a window of opportunity towards saving and reducing legal costs.
Pro-Tip
Make a habit of reviewing your budget whenever your company is about to make a purchase or has made a sale.
Hold your cheques
We all know about the urge to get rid of the payroll as soon as possible. Soon, you’ll be lodged with your chequebook, writing cheques as if your business can afford to pay them all at once on a given day. Write your cheques all at once, if you may, but hold them and disburse payments by classifying your vendors and employees into two tiers.
Tier #1 – The Must-Haves
To ensure your business runs smoothly, you need to make payments to the legal firms that manage your income tax, insurance, bills, and other affinities before your operation culminates into a bust.
Some payments can provide you with enough leverage if you take care of your financial penalty and tend to a reasonable grace period modestly. Having long-term electric or sewage complications can affect the relationship with your customer or the health of your employees,
Tier #2 – The Resolves
Vendors, contractors, and wholesalers are at the loose end of the string, mainly because they’re not only flexible but expect regular payments despite delays. The only key motive here is to strengthen the bond of trust with your wholesalers so that you can acquire credit to keep your business running.
Pro Tip
It is better to assign tentative dates for making payments to your vendors, employees, and personnel.
Keep an Emergency Savings Account
To avert a likely cash flow crisis in business, create an emergency savings account or tap into a trustworthy directory on the Internet for attaining Business Loans Online. Let’s suppose that you’ve managed to restrict all types of unnecessary business expenses with expertise, including the maintenance of regular, timed payrolls.
At times, your business might suffer at the hands of your client, or from a sale that has yet to make a profit. In such a situation, your company might fall back on its payments at least occasionally.
In addition to keeping a line of credit, maintain at least two to three payroll cycles in your emergency savings account so that you can set those free when required without delaying any expenses.
Pro Tip
Create emergency savings account so that the rest of your company doesn’t suffer at the hands of a third party.
Keep a separate bank account for sales tax
Stop trying to keep your business afloat with your sales tax money. Using your sales tax money to fund your operations is like plunging into an ocean of sharks – namely interest, penalties, and irregular fees.
Keep a separate bank account for collecting your sales tax money. It would ensure smoother operations of your business because you’d escape any or all tax liabilities facing your company if you used sales tax revenue for funding.
Pro Tip
Consider keeping three business accounts before agreeing to work on the road towards entrepreneurship — designate one each for cash inflow and outflow so that you can manage your payrolls and invoices properly.
Hire a Payroll Service
Before you realize that you’re knee deep in debt, try to focus on the operations of your business by handling the expense and cash flow management to a payroll service. If you don’t trust an outsider with your company’s cash flow management, try hiring an in-house payroll service for tracking and tending to your payroll taxes.
What do you think is better – bankruptcy or creative cash flow management?
Pro Tip
At times, you need to head over to the pros to help you sort through your cash flows.
Be open to all sorts of payments
Accepting cash might pose specific vulnerability towards significant theft, human error, or time to bank it in for business. Try to be open to all sorts of payments so that your accounts’ receivable turnover ratio doesn’t get affected by the time taken for tracking an invoice after issuing of one.
Pro Tip
While cheques can bounce on account of human error, make sure your company accepts payments via wire transfers, credit cards, and Samsung or Apple Pay, among others.
Prepare for a rainy day
From vendors to your banker, try to strengthen your relationship with people concerned with your company’s operations. While your vendor can extend credit to you despite late payments, improve your relationship with your bank provider who can also help put in the right word for you for a small business loan.
Pro Tip
Tap into a third-party credit provider.
The Final Verdict
Learn how to manage your time well so that you can grasp a better insight into your cash flows and finances. As soon as your business gets off the high ground, you’d have to invest money for your personal and professional development. Try to document everything beforehand so that you can learn from improvements and train your employees rigorously.
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