Money doesn’t just make the world go round – it breathes much-needed life into small businesses the world over. For a company to become stable and grow into new areas, business owners need to do two crucial things around their business cash flow – monitor it, and keep it controlled. It may sound easy, but where financials are involved there is always a challenge. At Pebbles Bookkeeping Services, we have had to get out the emergency heart paddles many times to tackle a small business’s financial flatline, and today we are going to do the same for you with some simple cash flow management tips for your business.
Start With the Basics
Before we delve into these helpful tips for financial stability, let’s determine exactly what your cash flow truly is. We label your cash flow as any money movement in your business bank account.
Before getting into it fully, let’s draw the line between profit and cash flow – they are two separate things. Profit is the money your business makes after your expenses are taken out. Cash flow is simply the money flowing in and out (and we also mean the digital transactions here) of your business.
Now, just because your business looks profitable on paper does not mean that you are not having cash flow issues. Timing issues between when you receive money from invoices and sales and when you pay out expenses can prove a common issue for most. If you are a small business without large outgoings and expenses, you may experience fewer cash flow problems. But if you have many outgoings and expenses – you can expect an issue or two with your cash flow.
Forecasting
One way to effectively manage your cash flow is to predict the amount coming in and out of your business. We call it cash flow forecasting, and it allows you to anticipate your potential shortages and surpluses in a way that can help you make informed financial decisions.
While there is online software that can help, you can list your expected sales revenue, investments, and loans for a start. Follow that with a forecast of your projected expenses for rent, salaries, utilities etc. Also, as a helpful hint during this, don’t forget to account for significant expenses like taxes and equipment purchases, even if they are one-offs.
Monitoring the Flow
Once you have put together your cash flow forecast, try not to get into that habit of putting it away and having done with it. You must keep updating and reviewing it as you go. The best way to identify discrepancies will be by comparing your cash flow to your forecast, helping to stop the cash flow problems from reaching that critical stage.
You should make a point of controlling your expenses and always looking to cut unnecessary costs to help stabilise your cash flow. Once you start with these small steps, you will discover more steps to effective cash flow management. Of course, every business owner has to rely on a little help now and again to stay updated, which is where small business bookkeeping solutions come into play.
If you need bookkeeping services in Manchester, call upon the Pebbles bookkeeping team and we can help you get back on track. Contact our friendly team today.
