Keeping an Eye on Cash Flow is Vital for Businesses
Author: Chris Coggins
Managing cash flow is like trying to herd cats. Just when you get close to success, it slips through your grasp. So you have to plan for it, make it an element of your 2013 goal-setting, if you haven't already.
Timing is everything. You must coordinate the coming and going of funds (or have sizable reserves). If you don't, poor cash flow can disrupt product development, marketing and overall growth, and it can damage your reputation and credit rating.
Worst case? Inefficient cash flow can put you out of business.
Predictability is critical.
It’s essential to understand your cash flow patterns. In fact, your business depends on your ability to make accurate projections. Developing a systematic approach helps you orchestrate the flow of money and set goals to maintain it.
The cash flow goal-setting process is essentially the same as other business planning. You should:
- Review and analyze your financial history.
- Plot income and expenses. You’ll see clearly when you might not have enough revenue to pay bills.
- Build a budget to establish rough projections.
- Minimize fluctuations. You may need to occasionally borrow money, at least short term.
- Try to increase sales when you most need income.
- Create an investment strategy that puts extra cash to work for you.
Managing cash flow is an ongoing activity that will help ensure that you’ll be prepared if the business environment changes, new opportunities to invest or increase sales appear, or you encounter unforeseen challenges.
Most small businesses need help analyzing the movement of their funds and projecting out to the future. That's where we come in. We've helped countless companies create plans for maximizing cash flow. Turning this task over to us at The Tax Office is a smart, strategic and cost-effective business decision.
Need more comprehensive help managing money? We can provide all of the benefits of an inhouse accounting department -- without the payroll expense and personnel issues. Our working partnership with you can include financial goal-setting. We're also accomplished in managing your day-to-day bookkeeping and other chores like tax preparation and payroll. So contact us today for a free consultation.
