Five Top Strategies to Optimize Cash Flow
What is your definition of cash flow? Simply put, it’s money in and money out of your business = CASH FLOW. Would you say your company is having good cash flow? Are you profitable, and you think that means you must have good cash flow? Are you accruing credit card debt and that means you are experiencing poor cash flow? From my seat at “your table” I would tell you as a CFO/Cash Flow Strategist, that to have good cash flow means:
- Your Net Profit is a minimum of 10% of your Gross Revenues. If your sales are $100k/month, your Net Profit should be a minimum of $10k/month.
- Your Net Profit % needs to be higher if you are servicing debt and/or taking owner distributions. These items are posted on your Balance Sheet and do NOT affect Net Profits!
- You are adding more money each month to your bank accounts that helps you achieve 3 times your monthly payroll expense. If your payroll is $50k/month, your total cash available to you should = $150K at the start of each month.
Key Strategies for Optimizing Cash Flow in Today’s Business Environment
From my experience in today’s environment, most business owners are spending money as fast as it is coming in and then some. Being accountable and aware of the movement of money in and out of your business is the most important step toward optimizing cash flow.
Top 5 Strategies that I highly recommend paying attention to optimizing cash flow are:
- Bring outside eyes to your financial arena: Take the time and consider investing your money into a Fractional CFO / Cash Flow Strategist. I help my clients understand how to read their Profit and Loss and Balance Sheet from a CEO’s perspective rather than from your CPA’s perspective.
- Learn to “follow the money” from a Profit and Loss to the Balance Sheet: I defer to #1 above. Do you know how to read your P&L and Balance Sheet on a monthly basis?
- Implement an Accounts Receivable Process (Money In): This is the money that you have earned and want to come in as fast as possible. How do you ask for money owed?
- Implement an Accounts Payable Process (Money Out): This is money going out that you want to slow down and control how you pay your vendors.
- Work from a Budget that is created from proactive strategies: I say it often; cash flow is not about the next 30 days as that money is already in play. You need to plan for the next 90 to 120 days from now.
Optimizing cash flow will take creating some proactive strategies! Partnering with an Outsourced CFO / Cash Flow Expert can help to empower you to increase your cash reserves and profitability. What if you could learn to manage the outflow of money against your revenue trends and make a profit and optimize cash flow?
Take back financial control and learn how to be proactive by scheduling a complimentary consultation with me by clicking the button below.
Want to understand how to read your financials from a CEO’s perspective and not rely on your CPA and/or Bookkeeper to interpret your financial story? Connect with me for an hour and I will tell you what your financial story is from a CEO’s perspective.
We’re thrilled to announce the exciting rebranding of our SWOT package as the Cash Flow Optimizer Package! This offering still provides all the incredible benefits you know and love, including the delivery of an eight-month cash flow forecast directly tied to your current financial story, guidance on maintaining minimum cash balances, a comprehensive analysis of your current situation, and a personalized one-on-one consultation to understand your cash flow forecast.
Experience the power of optimizing your cash flow with our newly renamed package, designed to help you make smart short-term decisions and secure a prosperous future for your business.