Solid Techniques to Improve Your Business’s Cash Flow
Running a small business is a serious challenge — and one that not all business owners are fully prepared for at the start. Indeed, there can be a “sink or swim” element to running a business. Certain parts of the work must be learned on the go and, if they aren’t — or aren’t learned fast enough — your business may not be able to survive.
One such task many business owners struggle with is evaluating and improving cash flow. It’s easy to see that your business is making a profit — or losing money — and assume that’s the end of the story. However, Abrigo notes that when you view your business from a cash flow perspective, you can learn to assess nuance. After all, turning a profit isn’t all that’s needed for success, and being in the red doesn’t always mean you’re in free fall. Here’s a look at how to improve your business’s cash flow, presented to you below by Loan Wolf Financing Services.
Get a Handle on Payroll
Some sources of unhealthy cash flow can sneak up on you. Take payroll, for example. If everything is going smoothly with payroll, then you can trust your cash flow reports to be fairly reliable. When things go wrong with paying your employees, however, you can end up in a tricky spot where it looks like you have more money than you actually do since some of it is owed to your workers.
Payroll issues will impact your bottom line in other ways, as well. Most importantly, your employees will have little patience for more than the periodic payroll mistake. That’s why it’s so important to have a payroll system that fits into your workflow. For example, if processing payroll in the field is a must for you, then be sure to pick software that has mobile cross-compatibility. Focus on the features that will keep your business running smoothly, such as the ability to review and sign pay stubs, run direct deposit, and even e-file payroll taxes in-app.
If you’re not sure where your payroll mistakes are happening, enlist some professional assistance. Data analysis services can take a closer look at your reports and help you determine ways you can improve your payroll and put a plan into action.
Organization is a key to success, and that includes everything from project management to invoicing. Fortunately there are several tech tools that can help. For example, even if you still have customers who prefer a paper invoice, an online customized invoice generator makes it easy to quickly generate and save invoices online to help you keep things organized. Plus, if you haven’t already, you should get in the habit of scanning everything in. Other ways to stay organized include using apps for finance, scheduling, and inventory management.
Most business owners will take on some kind of debt to get their business started. Indeed, many will continue to work with loans and credit in order to keep things running smoothly, especially in the first couple of years. Although this is perfectly normal, it holds you back from reaching full cash flow health. The ideal cash flow statement would be one where all income comes from sales and services rendered. As long as you have outstanding debts, you aren’t getting all you can from your profits, and poor debt management has been the nail in the coffin for countless businesses.
Fortunately, Dino Eliadis points out that there are some simple techniques you can use to shift your business toward self-sustainability. For example, you should focus on paying your debts down as quickly as you can without sacrificing stability. This also means being mindful of your loan terms, as some agreements include penalties for early repayment. If this is the case, you can create a savings account to hold money earmarked for the loan. This way you won’t touch/spend that money, and you can still pay the loan back at the pace the loan agreement allows.
Look Beyond ‘Black’ and ‘Red’
As we said above, cash flow statements allow you to look beyond profit and loss when it comes to evaluating business health. There are plenty of circumstances in which you might be losing money as a business but still on track as a whole. For example, most companies take several years to begin turning a profit, and that’s totally normal at the beginning. Focus on closing the gap, even if you’re doing so at a relatively slow pace.
Moreover, huge profits are not in and of themselves indicators of success. You could be making huge profits but failing to properly reinvest those profits in your business, leading to stagnation. Most people only think of working with a financial advisor when things aren’t going well, but they can be even more useful when you’re thriving. Seek advice on how to best invest in your business’s long-term growth.
Running a business takes serious financial savvy. With practice, however, you can make smart moves that allow your business to thrive. We hope this article helps you come up with solid techniques you can use to help your business be all it can be.
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