When running a business, managing your cash flow is a crucial component. Essentially, cash flow is monitoring the money that’s going into your business, i.e. profit, and the money going out, i.e. bills.
According to research conducted by score.org, 82% of small businesses fail because they have poor cash flow management skills, or a lack of knowledge and understanding of cash flow.
You may have a cash flow problem if your expenses currently exceed your cash, or sale profits; essentially, if your business spends more than it earns. In order to prevent this from happening, you’ll need to develop strategies that ensure you will always have enough money coming into the business. For instance, you could change your invoice tactics and ask for partial payment up front for a service you offer, invoice the client immediately after the project is completed rather than invoicing monthly, etc.
If you’re currently struggling with available cash, then there are certain strategies you can try to stave off any further outgoings, if you’re unable to recoup any cash. For instance, if you have payments to make to suppliers, you can ask to extend that deadline with them from the traditional 30 days to maybe even 90 days; this could give you enough time to get profit flowing back through your business. This strategy can also apply when your business is heading towards a potential cash flow issue and you want to prevent it.
Working with an accounting firm can be an investment in your business’s financial future. Watkinson Black currently offer a variety of services to help you with both your business and your business’s finances. Our friendly, fully-qualified team can review your business’s cash flow predictions, as well as its history, and help you structure a projection strategy that can avoid future cash flow problems.
Contact us today for our expert advice and guidance.