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8 Tips for Business Owners to Manage Cash Flow

For most small business owners managing their cash flow is one of the biggest jobs there is and most of that job revolves around making certain that there is enough cash coming in the next few months, or even weeks, to manage their financial obligations. Any advice that can help in that regard will be a bonus.

That’s why this post is dedicated to tips and suggestions to make that bit of your job easier. Following these tips will show you that at least some of the pain you’ve been suffering is probably self-inflicted and will hopefully help turn a little bit of cash into a lot of dough.

1. Have a good relationship with your bank

These are the guys that will either help you or kill you when the sky clouds over, so make sure you spend time building your relationship when skies are blue. This will pay you serious dividends in the times to come.

Also, when they do help you when times are rough, don’t suddenly forget them when they no longer are. You never know when things go pair shaped again and, if you don’t show any gratitude for what they did last time, they might not be so forgiving next time!

2. Not everything needs to get paid at the same time

If you try to pay everybody at once, there’s a good chance that checks will bounce and relationships will be ruined. For this reason, though it’s absolutely a good idea to write all your checks before hands if your funds are being stretched, perhaps don’t get them cashed on the same day. This will hit your budget hard and can ruin your credit history.

Instead, divide your payments into groups, based on how important it is that they get paid right away, and date them accordingly. The first group you send off immediately, the second group you let sit a bit and the third group you pay after that. In this way, incoming money that you collect over that period will make it less likely that you shoot your credit history in the foot.

How do choose what is most important? Well obviously if a bill not being settled means your business closes down (or stops operating at 100%) then that’s an important bill. So, pay your staff on time, pay your rent, pay the government and pay your utility bills.

The second group is bills that have a grace period or where the penalty for late payment isn’t too stiff. Yes, the costs incurred hurt, but having that cash on hand can be a life saver in a stressed situation. And the final group is suppliers, vendors and wholesalers. When your business is stressed, these groups will often accept late payments, as long as you communicate clearly with them and continue to at least pay some of what you’re getting from them. Then, when things get better, catch up on your payments and show them how much you appreciate their understanding.

3. Don’t use your tax money to keep your business afloat

It’s just too dangerous, especially as the bills you owe the government grow and grow and you don’t have the money on hand to cover them. The government will figure out what’s going on and those penalties can push you under or even send end up with you spending time in jail. So make certain that you keep your tax money separate. If you do need more money, consider taking out loans instead.

4. Schedule payroll payments for when your money comes in

If you get paid once a month on the month, don’t wait till the 27th to pay your staff. Chances are just too great that things will go wrong and you won’t have the cash on hand to pay them. Instead, schedule your staff payments for right after you’ve received your client’s money. That way that cost is immediately out of the way and staff will never end up disgruntled and unhappy (at least about that).

5. Have credible credit lined up beforehand

When things go wrong they rarely only go slightly wrong. For that reason, it’s a good idea to be prepared by already having things set up so that credit is easy to come by. This way, rather than having to run around from one credit provider to the next one trying to find somebody who will help you, you can invest your energy where it matters – namely in preventing your business from going belly up.

6. Consider leasing rather than buying

Especially when you’re not certain when the money is coming in, having a big cash expenditure to buy gear can be a bad idea. Instead, consider leasing the equipment – like computers, cars and other tools – that you may need at least until such a time until your financial situation is more secure.

This has the added advantage that your equipment will not go out of date, which can often make a big difference in areas where technology changes quickly.

7. Don’t overstock

Yes, sometimes the discounts might seem enticing, but if this ends up tying up huge swaths of your cash, then it can end up being a real problem. What are you going to use to pay those sudden expenses when something breaks? And how are you going to have effective marketing when you don’t have the money to pay for the advertising campaign? So don’t go gaga for discounts.

8. Shop around

Don’t depend on just one supplier. Yes, it will be much easier, but it will also cost you more. Instead, buy the stuff that you really need top notch from the best suppliers, but don’t let them talk you into supplying you with the wires, cables and monitors as well. Get those elsewhere, where you’ll end up paying less.

And negotiate! Try to talk them down over time. Keep asking if you can’t get a discount for having a long relationship and keep contacting other providers to see if they are willing to offer you a better deal to get your business.

Yes, friendship is important, but is it really a friendship if they’re taking you for a ride?

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