When it comes to owning a business, the age old saying remains true: cash is king. In fact, poor cash flow is the reason that 82% of small businesses fail. Keep these tips in mind as you build your business to help turn your small business into a big success.
1. Always look at the big picture.
First thing’s first, it’s vital to understand what “cash flow” truly means. Cash flow isn’t just your profit and loss statement—to understand your cash flow, you need to take a holistic look at your finances including things like accounts receivable, inventory, accounts payable, and taxation. To stay on top of your cash flow as a small business owner, you need to understand the bird’s eye view of the money coming in and out of your business.
2. Improve your invoicing process.
Helping customers pay you faster is an easy way to smooth out your cash flow, which can be a major pain point for small businesses. Studies show that the cost of unpaid small business invoices is over $825 billion, and 81% of small business invoices are 30 days past due. Aside from making sure your invoices get out promptly, seeking out new ways to make it easier for your customers to pay can help to close the gap between invoice and payment.
3. Have a plan in case you fall short.
No matter how well how you plan for the future of your small business, things happen. And when they do, having cash reserves set aside to make up for shortcomings is a safety net you’ll be thankful to have. Setting aside money for times when payments are slow to come in can relieve some of the stress and let you continue focusing on managing cash flow as a whole, not chasing down one invoice.
Managing cash flow is no easy task, but taking these tips into consideration can make a big difference in the success of your small business.