Small businesses are the backbone of the American economy. According to the SBA, there are more than 28 million small businesses in America, and they account for 54% of all jobs. Small businesses also create about two-thirds of all new jobs each year. So it’s no wonder that so many people want to start their own small business.
But what is often overlooked is the importance of cash flow management for small businesses. In order to be successful, small businesses need to make sure they have enough cash on hand to cover expenses until payments from customers come in. This can be a challenge, especially during tough economic times.
Fortunately, there are steps small business owners can take to improve their cash flow situation. In this article, we’ll take a look at some of the most helpful tips and steps you can follow.
Keep track of spending
The first step to improving your cash flow is to keep careful track of it. This means checking your financial records carefully to see how much money has come in and how much has gone out.
Watch out for patterns in your spending and income. If you notice a dip in your cash flow during a certain time of the month, look to see if there’s a pattern or reason for it. You can also use online tracking tools to help with this step. These patterns can show you where you can cut expenses or when you need to work harder on collecting the money owed to your business.
Boost cash flow by adjusting prices
If there’s a shortage of funds coming in, one way to get more money is to increase the amount of money coming in — in other words, raise your prices.
This may seem counter-intuitive, but if your business is strong and you’ve been keeping good records, raising your prices could bring in more money. You don’t want to do this all at once — instead, gradually raise the price of your products or services over time.
Have a Tidy Payroll System
When it comes to invoices and billing, it’s a good idea to keep everything as organized as possible. Make sure you have a clear system in place for tracking and paying your bills. More and more people are starting to see that invoicing software doesn’t have to be complicated and has many benefits. For example, a lot of that software can automate much of the billing process and greatly help your cash flow management. With a little training, any employee or contractor should be able to submit their own invoices — which means you won’t have as many late payments due to incorrect invoice information.
The more efficient your invoices and billing process is, the less time it will take to pay those bills — which means more money handy for other purposes.
Avoid Major Purchases
One of the best ways to keep a handle on your spending is to avoid big purchases. This is especially important during the first few years of running your small business. You don’t want to run the risk of over-extending yourself financially and spending more than you can afford.
Another suggestion is to wait a few months before making expensive purchases for items like new equipment, vehicles, etc. If you keep track of your cash flow and see that there’s room in the budget, then you should feel free to make the purchase. If not, then you can wait until there is more room in your budget. This way, you won’t risk overspending and getting yourself into financial trouble.
Limit spending on office supplies
Office supplies are an easy target for small business owners who want to save money. You may think you’re saving money by buying the cheapest office supplies, but you may actually be hurting yourself.
The truth is that not all office supplies are the same — and using cheap paper for printing documents or generic toner cartridges can lead to big problems down the road. If your business puts a lot of time and effort into marketing materials like flyers, business cards, promotional items, and signage, then you should consider using only high-quality supplies.
This may seem like a small thing to some people, but it can actually affect your credibility as a business owner if you don’t use quality office supplies. While saving $10 on paper might be nice now, is it worth risking losing $50,000 in business?
Everyone has to invoice out for their services, but you should also think about delivering on time as well. When you make a commitment or promise to deliver something by a certain date, it’s important to keep that promise. Not only does this create goodwill with your customers, but it can also boost your cash flow.
If you tell your customers that their job will be completed by a certain time, then you should do everything in your power to make sure that happens. It’s better to set realistic expectations for all involved rather than missing deadlines and making people wait around. If this happens too often, you could risk losing the trust of your clients. Your reliability will be reflected in the reliability of your company’s cash flow.
Hire the right people
If your business is growing, then it’s important that you hire employees who can help with cash flow management for small businesses. You want to make sure they are reliable and can handle your finances properly.
The first thing to look for is experience and training in the field. If they don’t have any experience, then try finding out if they’re willing to go through financial training or take classes on bookkeeping and accounting.
Another good way to see what kind of job applicants you’ll be getting is by checking online reviews of the candidate. If you see that previous employers have had issues with them, then it’s probably best not to hire them for this reason alone.
Running a small business is tough. It requires you to wear many hats and juggle an ever-changing workload. Keeping track of your cash flow can help manage some of the uncertainty involved in running a small business, but it’s not always easy. The tips provided above should provide some relief for those of you who are struggling with managing your finances or have been feeling uneasy about how much money has been coming in lately. We hope this article was helpful! If you are looking for more advice on the topic just look for similar articles online!
About the Author
Laurie Gibbs enjoys writing about lifestyle topics and created the website to share advice she has learned through experience, education, and research.