5 Strategies For Boosting Your Business Cash Flow
Although cash is the lifeblood that sustains every business, far too many business owners fail to properly manage their cash flow. And this is despite the fact that statistics consistently show that running out of money is one of the main reasons new businesses go under.
Trying to run a business without carefully managing your cash flow is like fighting a rising tide: Sooner or later you’re going to find yourself underwater. And even if your business generates healthy revenue, you can still experience the occasional cash crunch—which is especially true during your first few years of operation.
To avoid joining the ranks of bankrupt startups, get smart about boosting your cash flow by implementing these 5 strategies.
1. Get Professional Support
To save money, lots of new business owners try to manage their books on their own, but this is a major mistake. Managing cash flow is too time consuming, complex, and critical to your company’s survival for you to fit it in with all of your other responsibilities. In fact, the very first team member you hire should be a professional bookkeeper/financial manager.
Effective cash-flow management is the foundation upon which all of your company’s financial and tax strategies are built, and it needs to be done properly from the very beginning. With this in mind, even if you’ve yet to earn any revenue, you should consider paying for a bookkeeper out of your own pocket.
Hiring a highly experienced bookkeeper with whom you can build a tight relationship might require an investment of time and money upfront, but the ultimate payoff in terms of your financial strategy and tax savings will more than make up for the initial effort and expense.
If you need support in finding the right bookkeeper, work with us, your Personal Family Lawyer® for guidance. We can refer you to bookkeeping professionals in our area we trust most to ensure your company has the proper financial oversight from the start.
2. Implement Financial Systems
Above all, effective cash-flow management requires sound systems. If your company’s financial systems and processes aren’t set up the right way from the start, even a skilled bookkeeper isn’t going to magically fix them.
As your Personal Family Lawyer®, we can support you to set up effective financial systems. We will help you put the proper systems in place to manage your cash flow and ensure your company has a rock-solid financial foundation that won’t suddenly collapse when the going gets rough.
3. Closely Monitor Accounts Receivable
Many startups experience negative cash flow simply because they don’t stay on top of accounts receivable. You must ensure that your customers pay you on time and in full. Accounts receivable that go unpaid for too long are more likely to get overlooked and go uncollected.
Your bookkeeper should keep track of all accounts receivable and include them in the monthly financial reports that he or she submits to you. Having these details included in your reports will not only keep you apprised of your company’s financial health, but it can also allow us to better assist you if and when you ever need support with collections.
4. Get Paid Upfront
One easy way to boost your cash flow and eliminate headaches associated with accounts receivable is to have your customers pay their bills upfront whenever possible. This is especially true if you have clients who are consistently late with payment.
If full payment upfront isn’t feasible, even requiring partial payment as a deposit will improve cash flow. To encourage quick payment, consider offering discounts for upfront or early payment. At the same time, have a firm policy in place that penalizes late payments, and make sure your sale agreements clearly spell this policy out—and you consistently enforce it with all late paying clients.
5. Maintain A Cash Reserve
Just about every startup experiences revenue shortfalls. And your company’s survival will likely depend on how you handle these lean times. To shield your company from the inevitable slow periods and unforeseen emergencies, try to maintain a cash reserve—even if it’s just access to a line of credit.
Having a reserve to fall back on will not only protect your company’s financial health, it can also save you from the stress and desperation that comes from unexpectedly running out of money. Nothing will kill your team’s morale—and your company’s growth—more than finding yourself unable to cover payroll.
Keep The Cash Flowing
All the vision and passion in the world won’t keep your startup afloat if you fail to properly manage your cash flow. That said, you don’t have to be a financial genius to keep your revenue flowing freely—you just need the proper systems and support. As your Family Business Lawyer, we can support you with both.
We will assess your current financial systems and advise you about additional ways you can shore up any weak spots in your company’s foundation. Getting a handle on your cash flow will prevent your startup from running out of money, and it will also free up your time and energy to focus on the big-picture responsibilities needed to ensure your business not only survives, but truly thrives. Contact us today to get started.
This article is a service of Rebecca Easton, Personal Family Lawyer®. We offer a complete spectrum of legal services for families and businesses alike and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer Start-Up Sessions or Audits for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.