For most small business owners, cash flow is constantly in the front of their mind. It is necessary to operate a business, but with a small ratio of debt to income, it may not always be possible to keep an abundance of cash on hand. Many small business owners must carefully manage their cash flow in order to pay bills and prepare for emergency expenses. Los Angeles-based Financial Advisor and 1080 Financial Group Founding Partner Stephen Rischall shares tips that you can take to better manage your cash flow.
Keep detailed records
A surefire way to manage your cash flow is to maintain incredibly detailed financial records. Rischall states, “One of the first things any new business owner should implement to manage cash flow is an accounting system. Tracking business income and expenses is fundamental to a business’s financial success. Whether you track this information manually or use technology to help synchronize and categorize transactions, what matters most is effectively tracking this information in the first place.” Keeping detailed records not only gives you an idea of how much money you’ve got in the bank, but it can also help you track your major expenditures, so you know when the potential drains on cash are coming.
Arrange your payments
Another suggestion Rischall makes is to spread major payments throughout the month. “During the early stages of a business, access to capital may be limited and it’s important to pay any debt service and vendors on time. Consider calendaring due dates for recurring fixed and variable expenses to ensure bills get paid on time. This will help you develop good habits to track inflows and outflows while increasing awareness of business expenses.” Staggering your payments throughout the month may help you to avoid a situation in which most of your bills are due at once, and you’re anxiously awaiting payments from vendors to cover the expenses.READ MORE: 'It's Just Not Working': Women In The Workforce Hit Hardest By Pandemic
Perhaps the most important method of controlling your cash flow is to get into the habit of smart finances from day one. Rischall states, “Successful businesses require a strong financial foundation, it’s critical to keep track of your business’s finances from day one. If you don’t, it will end up costing more time and money to get your finances organized later.” Making sure that you are skilled at accounting, or hiring a trustworthy CPA or financial advisor, can help you keep watch on your business’s money, which may make it easier to prepare for the future.
Accounting skills are a must for anyone planning on opening a business. Startup expenses, financial emergencies, expansion and more can put a serious strain on your company’s finances. Tracking your dollars from day one and coming up with a realistic cash management plan can help you operate your business more successfully.
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This article was written by Alaina Brandenburger for Small Business Pulse