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Cash flow management is one of the more crucial aspects of being an entrepreneur, but it is also one that many do not think about until it is too late and they are faced with a cash squeeze. There are two main reasons people leave it until its too late: because they don’t know how to manage their cash flows, or they choose not to worry about it. Either way, a neglected cash flow is a recipe for disaster. Luckily, BDC offers a comprehensive E-Book that outlines steps you can take to create a stronger business through cash flow management.
In this guide, you will learn the fundamentals of what it takes to have complete control over your cash flow. The following 7 points are an overview of the in-depth e-book from BDC:
- Building a Profitable Business
Ensuring you have cash to control is the most obvious part of mastering your cash flow. Some tips to building a profitable business are:
- Have Sufficient Revenue – Cover all your expenses and produce your desired profit.
- Set Appropriate Pricing – Do your prices cover your costs?
- Be Efficient – Be sure that your operations are being run in the most cost effective way.
- Be Mindful of Profit Margins – Analyze each component separately to reveal problems that you hadn’t noticed and opportunities to free up resources.
Simply put, if you are running an unprofitable business, cash flow management will be irrelevant. This means you must carefully analyse all parts of your business, including cost structure, pricing, revenues, efficiency, margins and more.
- Planning your Cash Flow
Your planning will always start with your financial projections, but it is important that your projections have some sort of basis, and minimal guesswork. Projecting your cash flows can sometimes be tedious work, and that’s why Venture Kamloops has a financial plan template that is already formulated so you can plug in numbers and predict your costs and revenues in the coming years.
- Tracking your Progress
Once you are able to make educated predictions, you can then use those during the year to compare your actual cash flows, to the projections and make changes as needed. Really focus on your actual results, and try to identify any short-comings or inefficiencies. The more you monitor your cash flows, and track what your company`s financial tendencies are, the easier it will be to fix problems before they become too big.
- Smarter Finances
Looking at expanding? Maybe making a large purchase or investment? Be sure to avoid using too much of your cash flow to make these purchases, or you may find yourself strapped for cash if something unexpected arises. You can look at borrowing to finance these expansions even if you have the available cash, because if your money is tied up in assets, you may have to pass over other lucrative opportunities.
- Getting Paid Faster
Collecting your accounts receivable is another obvious way to increase your cash flow. A classic detriment to a company is having too much liability in the form of accounts receivable. Consider offering discounts on fast payments, streamlining your invoicing, being stricter on late payers and perhaps even setting up an online payment system.
- Controlling Outflows of Cash
Look at your overall costs and see where you can trim a little in different areas. Manage your variable costs, don’t get complacent with your fixed costs, invest in tech to increase efficiency and always try to find the most cost-effective way to operate.
- Control your Inventory
An effective supply chain is key to better cash flow. Having an ineffective inventory system can have adverse effects on the functionality of your business, its reputation and the overall success. Too much inventory ties up cash flow, and too little can cause you to run out of a product. Be sure to keep a wide variety of inventory items, plan for changes in demand, build strong relationships with suppliers, cut products that aren’t selling and consider incorporating technology to help track inventory.
An article from Business Insider states that 82% of businesses experience cash flow problems. Focusing on cash flow management should be in the forefront of any entrepreneur’s business practice. It can be the difference between an ultra successful venture, or a flop.
For an in depth look at all of these 7 points, and case studies based on them, check out the Master Your Cash Flow E-book from BDC HERE.
For access to a financial plan template that will help you project and track your cash flows, click HERE. To get the sheet in excel format, click the link at the top of the financial plan template instructions, and email us to request it.
At any time, feel free to reach out to Venture Kamloops so we can answer any questions or identify solutions for your business. Our services are complimentary and confidential, and we’re here to help businesses have the best opportunity to succeed in our city.
Link: http://venturekamloops.com/business-tools/get-started
EntrepreneursFinanceGeneral BusinessCategorised in: News Releases
