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Cash Flow: The Key To Your Business Growth Success

Cash Flow: The Key To Your Business Growth Success

You’ll find a lot of information and advice on how to make a profit or cut costs for your small business online these days. And while both are valuable points, there is one thing that is even more important to the day-to-day running of your business and your ability to start scaling up: cash flow.

Managing your cash flow properly is key to your stability, and also your ability to build up cash reserves for growth. Yet few business owners are aware of its importance, and many of these unfortunate companies will end up running out of steam – and possibly money. Let’s take a look at some of the things you can do to improve your cash flow.

Recording and forecasting

First and foremost, make sure you are tracking all your spending and accounting for every dime you spend. Get an accountant that specializes in your industry – you might need one that has experience with working with female entrepreneurs, for example, or an accountant that specializes in the technology sector. Once you know where every dollar is doing, you’ll be in a much better place to improve your position.

Outline your expectations

When you are working with clients, it’s vital that everyone understands your expectations. The idea here is to make sure you are getting paid as quickly as possible, so make sure you have an agreement on what constitutes completion of service or sale of a product. This helps you avoid customers being disgruntled, gets you paid quicker, and preempts any potential problems.

Get paid fast

The quicker you get paid for your invoices, the better your cash flow will be. It’s that simple, so consider reducing the gap between your invoice date and payment date. If a customer doesn’t pay up within that defined period, it’s vital to have a system set up to chase them – you can do this automatically with many accounting and invoicing software programs.

Pay up slowly

While you want to be paid quickly, you also want to delay your payments to your suppliers for as long as possible. We’re not talking about making late payments, of course – instead, you should be establishing a longer payment schedule with your suppliers. Let’s say your contract with clients has a thirty-day payment period, but you have a ninety-day payment period with your suppliers. This gives you an opportunity to turn your profit into more products or services multiple times over before paying back your debt.

Trim your inventory

It might be tempting to load up on inventory as your business grows, but there is a cost attached to doing this. As any business owners in the manufacturing or distribution business will tell you, carrying inventory is bad for your cash flow – and, therefore, your profits. Ideally, you should only stock what you need to serve your customers – the exact amount of supply to meet demand. Any more and you will be wasting money; any less and you will be missing out on sales.

Cash flow is vital to any growing business, and without it, your task will be made all the harder. These tips should help you sort out your cash flow and make positive steps in the right direction.



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