Cash flow management is a critical part to any enterprise regardless of it’s size. It doesn’t matter how much money your business is making; a large part of your businesses survival is dependent on good cash management.
Recently a financial study was done by U.S Bank in which it was determined that as many as 82 percent of startups and small businesses fail due to poor cash-flow management. It just goes to show that even the most brilliant entrepreneurs can fall victim to cash problems if they let their guard down. So where are some of the key areas to watch?
Optimism goes a long way towards making your business a success, and it’s a good trait to have as a new business owner. But you must be careful with being too optimistic when it come to money. It’s important to be realistic with your sales forecasts. You must use real numbers based on real sales and confirmed orders to form any kind of future sales predictions or forecasts. The worst you can do is surpass your projections, and that’s a good thing.
Keep you spending in check. It may be true that you must spend money to make money, but you have to make sure you’re spending on the right things. Consider the cost benefit of everything you consider purchasing. Can your business get by without that fancy gadget, maybe there’s a used one or a lesser model that will do for now? You can always get the fancy one later when you’re making more money.
Either being too nice or procrastinating on past-due receivables can get you into cash trouble fast. Get to work on any unpaid invoices from clients. Get some policies in place with your customers that spell out the penalties when payments are late.
Running your own business is a lot of work and it’s also exciting. Don’t let poor cash flow ruin it for you.