For many small business owners, managing cash flow is one of the most challenging aspects of running a business. A U.S. Bank study revealed that 82 percent of businesses close their doors because they simply don’t have enough cash on hand.

The best way to avoid a cash flow gap is to stay ahead of it. A cash flow forecast can help you see the big picture and is necessary to position your business to handle both growth and downturns. Regular monitoring of cash in and cash out will help you anticipate more immediate needs.

No matter what your cash flow situation, there are a few simple things that business owners can do right now to improve cash flow management.

1. Look ahead.

There’s a proverb that applies to cash flow: He who doesn’t look ahead remains behind. If you haven’t looked at your cash flow forecast recently, take some time to review it and adjust as needed.

Your forecast should predict income and expenses for the next 12 months. As you review your forecast vs. your actuals look for trends, anticipate fluctuations, and give yourself enough time to make plans if things aren’t going as anticipated.

For example, using a cash flow forecast, a seasonal business owner can better understand when business peaks and valleys and how it impacts cash flow. Having that knowledge going into a slower season, they can adjust spending or secure funding to help avoid a cash deficit.

2. Be prepared.

No matter how good your forecast is, things will not always go as planned. Take a page from the Boy Scouts and be prepared for the worst-case cash scenarios in your business.

Every business has a series of worst-case scenarios ─ from a pizza oven that breaks down to a project that gets off schedule and pushes payments out. Set aside some time to write down every worst-case scenario you can think of. Then consider, if one of these things happened, how would your cash flow take a hit? And how would you adjust?

Making a worst-case scenario list and understanding the costs associated will make it easier to jump into action if something does go wrong.

3. Establish a get-paid policy.

Small businesses run into trouble when they have outstanding receivables that aren’t getting paid in a timely fashion. Often, a simple policy can tighten up the delay in getting paid.

If you’ve been winging it when it comes to accounts receivable, it’s time to put a policy in place that will hold you and your customers responsible for collecting and making payments.

Since billing cycles vary from industry to industry, you might not have the leverage to shorten the billing cycle significantly. But with a policy in place, you can set expectations and plan your forecast accordingly.

Need a better handle on working capital, what it is, and how to manage it in your business?
Download The Ultimate Working Capital Guide, The Tips You Need to Improve Cash Flow Right Now

4. Set up recurring billing.

If you have regular customers, make it easy for them to pay you by setting them up with recurring, automatic billing.

Many online accounting software packages offer automatic, recurring billing as a feature. And, your customers might even view it as a benefit of doing business with you since automatic payments can make their lives easier.

Knowing that every month you have regular cash coming in and that you aren’t waiting on people remembering to make a payment, will make forecasting cash flow easier.

5. Automate invoicing.

Any time you can automate a process, you save your business time and money. There are many free and low-cost invoicing software solutions that directly connect to your accounting software.

This makes letting your customers know when a payment is due faster because the process is not relying on a person to compile and send out an invoice.

With automatic invoices, you’ll not only get invoices out faster, you’ll also eliminate paper and the costs associated.

6. Move customer info to the cloud.

If you can’t get in touch with your customers, it will be hard to let them know when a payment is due. Accurate customer data is key when it comes to getting paid quickly and keeping your cash flow positive.

If accessing customer information from many different locations would be beneficial to your business, consider moving your operations to the cloud. This way you can update customer data from different access points, like a smart phone, tablet, or laptop, without losing accuracy.

7. Count your inventory.

Keeping track of your inventory can have a huge impact on your cash flow. It’s extremely difficult to order additional inventory or supplies, if you don’t know what you currently have in stock.

To get an accurate inventory: count during off hours when employees won’t be distracted by regular business needs, count everything twice, and don’t forget to count items in transit, at other sites or in alternate locations.

An accurate inventory count will help manage stock, determine ordering, understand losses, and put a value on assets ─ all key pieces in managing cash flow.

No matter how good you are at managing cash flow, unexpected things come up and you might find yourself in a situation where you need a short-term infusion of cash. Here at Swift Capital, we’ve helped over 20,000 small business owners get the funding they need to bridge cash flow gaps and move their business forward.

Need a better handle on working capital, what it is, and how to manage it in your business?
Download The Ultimate Working Capital Guide, The Tips You Need to Improve Cash Flow Right Now

Our mission at Swift Capital is to unleash the potential of every small business by providing them with fair and convenient access to working capital. We harness data and technology alongside personalized human expertise to see the true potential in every business. Did you like this post? Tell us what you’d like to see on our blog. Email us at [email protected]


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