Managing Cash Flows for Small Business Owners
Every business owner needs to manage their cash flows for their business. Cash flow is the total amount of money that flows in and out of your business. Cash is coming into the business when collection of accounts receivable takes place. Cash is going out of the company when payments to vendors are made or expenses are paid.
A cash flow statement is an essential report a business owner should review frequently to assure that the company has positive cash flows. Positive cash flows are when more cash is coming into the business then going out. Negative cash flows are when the opposite happens, more cash is going out of the company than coming in. A company will not survive very long when it has negative cash flows. These are some ways to manage cash flows and keep the company in a positive cash flow position.
1. Collect open receivables as quickly as possible. Resolve any issues quickly after a customer has been invoiced and ask for payment as soon as services have been provided with customers that have past payment issues.
2. Offer discounts to customers who pay early or require down payments for service work.
3. Try to set up the longest payment terms with your supplies such as net 60 days or 90 days. Do however pay on time once terms are agreed upon, since late fees can be applicable.
4. Consider discounts offered by vendors for paying early.
5. Decrease expense whenever possible during cash slow months, forgo spending on business wants and focus just on business needs.
6. Research ways that can assist the company during times of cash flow issues such as a line of credit.