If you’re taking the pulse of your business, of course, the first thing to consider is your cash flow. If your cash flow is poor, you feel poor because you can’t pay the bills nor can you use money for what you’d like.
Your image can also suffer with vendors or with customers, if you don’t manage your cash flow.
Creativity, planning and communication are all vital in cash flow considerations.
Here’s how to avoid the cash-flow roller-coaster ride:
1. Prioritize your bills
Priority A — So you can best operate your company without business interruption, there are certain bills to be paid first. They include payroll, rent, taxes, or tardy utility bills.
Priority B — Some bills have grace periods, so pay them after gauging their importance. Some come with small penalties which you might more easily absorb. Such bills are important bills but you might be able to delay payment on insurance and utility bills.
Priority C — Even if you’re a tad slow, some vendors will work with you, if you communicate with them and make regular payments.
2. Pay with deliberation
For time management, it’s permissible to write your checks at the same time. But disburse your checks according to your priorities. This is to avoid bounced checks and over-draft fees.
Label each bill with the payment date. You should also develop a master list of your bills with payment dates.
3. Assess your financials
As the old adage goes: “A sale ain’t a sale until the money’s in the till.”
Don’t pay on the sales you hope to make. Pay on revenue that has actually arrived.
Who is more important than a quality credit provider? Treat the relationship like a business marriage.
4. Don’t operate your company with sales taxes
Maintain separate a separate account for sales taxes. Don’t even think about using sales taxes as working capital to operate your business.
You’ll suffer greatly from stress, fees, interest, and penalties.
5. If you have employees, consider a payroll service
You’ll save valuable time to operate and market your business, if you hire a professional service for the collection and payment of payroll taxes.
6. Evaluate options for your payroll schedule
Not all revenue streams are alike. Some sectors have a high frequency of deposits from daily sales. Others don’t. Restaurants differ from some wholesale suppliers. Learn what’s possible in your locale.
If you have a slow revenue stream, you don’t want to issue payroll as frequently as other businesses. A slow payroll schedule also delays payroll tax deposits.
7. Develop and maintain a strong relationship with your banker
Who is more important than a quality credit provider? Treat the relationship like a business marriage.
It’s also important to have a good working relationship with your bank, even if you’re not granted a line of credit or loan.
Should you unfortunately bounce checks, a local branch manager usually has the authority to waive fees or to honor checks.
From the Coach’s Corner, more cash flow tips:
For the Best Cash Flow, Manage Your Inventory Costs with 8 Tips — With proper inventory management, you can lower your expenses and increase your cash flow. For many businesses, that means taking a look at your inventory costs. When your products aren’t selling, obviously, it hurts. Products just lurking and collecting dust in your warehouse are costing you money.
Angel Investor: Tips for Increasing Cash Flow, Profits — A successful angel investor shares his tips for good cash flow and other profit issues.
Don’t let Minimum Wage Mandates Ruin Your Business — Your cash flow, credit access, pricing and profit margins are all directly or indirectly at-risk with the proposed mandates to increase the minimum wage. Workers should be paid well, if they’re good performers.
Partnerships — 7 Steps to Avoid Fights over Money — When a business has cash flow issues, a key issue that comes up every day is money. As a partnership, you have a shared responsibility to discuss issues on principles without arguing in an ad hominem manner. Your company is doomed if you ever attack your partner’s character or sarcastically belittle the person’s traits.
For Profits, Manage Your Growth at the Right Pace — Entrepreneurs frequently try to rush their business growth. Certainly, growth is great but if you scale too fast, you’re looking for trouble. The key is to prepare.
“Number one, cash is king… number two, communicate… number three, buy or bury the competition.”
-Jack Welch
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