Ask any successful business leader and he or she will tell you that no company, big or small, can survive without the right cash flow management strategies. It’s important to remember that, as a business, you don’t just have an obligation to your customers; you have obligations to your employees and creditors as well. That’s why it’s important to keep track of the money that moves through your business.
Cash is king when it comes to managing the immediate needs of your business and when it comes to planning for the long term; so it needs to be adequately managed down to the last cent. Let’s take a look at some cash flow management strategies that you can apply to your business. You’ll see just why this simple concept has such big implications.
An Analysis of Effective Money Management
As the lifeblood of any business, cash flow affects just about every aspect of operations that you can think of and is affected by just as many aspects in turn. Effective money management should involve going over an entire business operation, down to the smallest detail, so that nothing is missed.
This can involve a number of steps, including:
- Watching Your Sales – Sales keep your doors open, so this seems like a given. But it goes much deeper then simply moving more product than you normally do. Some of your customers may pay for your goods and services by using credit and you want them to pay what they owe as soon as possible. Money that sits in limbo rather than in your bank account doesn’t do you any good, so you want to make sure accounts receivable are collected in a timely manner. Doing so will mean that your cash flow streams aren’t negatively affected.
- Watching Your Spending – While automating certain bills and payments from month to month can save you time, you don’t want to let your expenses get away from you. It’s easy to imagine a scenario where you find yourself wondering how a recurring payment became more expensive than you remember it being. However, this scenario won’t happen with cash flow management strategies that involve frequently reviewing what you spend. Your operating costs are essential to keeping the company afloat, but allowing them to grow out of control can spell trouble faster than you think. I would suggest looking at your business expenses every month and assessing their impact on your bottom line. From there, it might be worth your while to look for more cost-effective solutions to your necessary expenditures. This could mean moving to an office with lower rent, changing suppliers, or offering more flexible scheduling options to your employees.
There are plenty of ways to cut costs without sacrificing quality. The methods that work can vary from company to company, so you’ll want to do some research and experimentation in that regard.
- Watching Product Development and Your Budget – The best companies stay at the top by continually coming up with new offerings for their customers and your business should be no different. For example, research and development costs time and money. Whatever research you might be doing for your company, you want to make sure that you keep up with how much it costs. Cash flow management strategies in this context should involve setting a budget that a project needs to stick to. Failure to do so can easily lead to development of that new product becoming a money pit from which you might have a hard time recovering.
- Keeping Your Relationships Strong – It’s no secret that people like incentives, and that’s something you can easily fit into your cash flow management strategies. How is that possible? Think about your regular customers – those who buy often and can always be relied upon to pay when they’re supposed to. In many cases, it might make sense to offer them some kind of incentive in the form of a discount or a special deal. Not only will it strengthen the relationship that you have with that customer, but the customer may be compelled to buy more and spread the word about your goodwill.
Keeping Track of it All
Regardless of what you do to keep money moving, your cash flow management strategies should always involve meticulous record-keeping. When using cash flow management to keep track of your income and expenditures, you can use spreadsheets and checklists as part of your financial statement analysis to make sure that your budgeting stays on track, your accounts receivable are paid, and your ongoing projects are being carried out as planned.
Remember, running a business successfully does not need to be complicated. Keep it simple!
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Manny Skevofilax is a consultant, speaker, and author that helps business owners to make more money by successfully navigating the challenges of growing their businesses profitably. Since 2003, Manny achieves extraordinary outcomes for his clients by using his experience in strategic planning, financial statement analysis, operations, organizational development, and team-building.
Manny can be reached at 410-808-3441 or via email at email@example.com.