We want to give you something to look forward to every week, so starting today, we are unleashing our Financial Friday series that will feature a mix of blogs, infographics and more. Keep reading for the first post!
The four practical processes we advocate at Campbell Business Services are financial management, operations management, talent management and sales and
marketing management. Today, we want to delve a little deeper into that first process with a look at cash flow.
We'll define cash flow as "the net amount of money that comes and goes out of a business during a particular period." The positive cash flow occurs when
a business has more cash at the end of a period than at the beginning. The flip side would be to have less cash at the end of a period, indicating
a negative cash flow.
Obviously, all of us would love a positive cash at the end of each period. However, with your many responsibilities as a small business owner, you may
have a tough time establishing and maintaining a positive cash flow.
Here are a few tips for achieving this financial management goal:
1. Find ways to cut, or at least reduce, your major expenses: It's hard to maintain this objective in our personal finances, let alone
for our businesses. Though this process will always be easier said than done, you must figure out at least a few items to focus on that could greatly
impact your cash flow. Budget as much as you can each month (of course, there will be emergencies here and there). If you find a similar vendor who
can reliably provide you the same product or supplies at a more affordable, consider that option and weigh out the pros and cons on budget sheet. Results
will be small when you first start this process; however, continue to refine your process until you begin seeing the impact on your cash flow that
2. Get cash faster from customers, clients and receivables: No business wants to feel like they are a collection agency, but no business
wants to be bankrupt either. Before entering agreements with customers and clients, be sure to define your payment requirements and deadlines by sending
out invoices as soon as possible. You can even include a percentage discount, or incentive, for clients who pay off their debt early. This process
will also keep you and your accountant from sweating at the end of the month because you won't have several unpaid invoices.
3. Take loans with manageable payment options: In addition to invoices to clients, your business will receive monthly billing statements
if you take out loans. These payments can put a strain on expanding your cash flow because you have to always meet these obligations first to avoid
strict penalties. When applying for loans, be sure to only take out the ones with reasonable terms that will give you at least a small cushion for
increasing your cash flow. Though a few exceptions exist, most of these loans will come with interest after a specified time period. Paying them off
early can save you money that can be put towards your cash flow.
We hope these tips help. Feel free to email us at email@example.com if you'd like more information on establishing positive cash flow.
We look forward to hearing from you!