Tips for Preventing a Cash Flow Storm

I feel very blessed to call this beautiful eight-month-old my granddaughter. I treasure time spent with family, and that makes me even more passionate about what I do.

Now you might ask, what does cash flow management have to do with family?

Everything! Having well-managed cash flow can help give you time for the most precious moments in your life. Plus, not having to worry about your business’s finances lets you be present and enjoy the people that are most important to you!

I love empowering business owners to make informed business decisions regarding their company’s cash flow. As part of this education, it is critical to know when you are experiencing a cash flow storm.

According to a WePay national survey, 41% of small and medium-sized businesses report having experienced cash flow challenges. How do you know if you are in the midsts of a cash flow storm? Some red flags include business owners worrying about making payroll, not paying themselves on a regular basis or accruing credit card debt.

If you are in the midsts of a cash flow squall, it has been brewing for at least 30 to 60 days. Moreover, any financial changes you make today won’t have visible effects for a month or two at best. For example, if you decide to make an adjustment in payroll you won’t feel it for another 30 to 60 days since the money is already at play.  

To avoid a cash flow crisis, I recommend being diligent about the following four elements:


1. Keep Bookkeeping Up-To-Date
In order to have an accurate understanding of how much cash is available on a monthly basis, you need to keep on top of your bookkeeping. As I always say, “The bookkeeper is the keeper of the cash flow.” Knowing how much cash you have on hand at the beginning and end of the month is essential to preventing problems down the road.

2. Have Eyes on Accounts Receivable (A/R)
To maintain a healthy flow of cash, you need money coming in as fast as possible. To achieve this you need good collection processes and effective systems to ask for money that is owed to you. 

3. Pay Your Bills or Accounts Payable (A/P)
You should not take care of A/P the same way you do your personal bills. Rather, you want the money you owe to go out as slowly as possible. Pay attention to vendor payment terms. If they give you 30 days to pay, take those 30 days. Just make sure to always pay on time to avoid late fees. Also, prioritize payroll first, then use what is leftover to pay your bills. A good strategy is to pay your bills in a cycle that is coordinated with payroll.

4. Have a Strategy to Service Debt
It is critical to have a strategy for how you use cash to pay off debts so you don’t create a cash flow storm. For instance, when paying off credit card debt, you should create a monthly budgeted amount to eliminate the debt instead of thinking, “If I have money left over, I’ll pay it towards my debt. Otherwise, I won’t.”
Dirty Little Secret of Cash Flow

Since cash flow storms take several months to form, it takes proactive strategies to keep a cash crisis at bay. The last thing you want as a business owner is to constantly be putting out fires and reacting to challenges. For good cash flow, you’re looking 90 days into the future to know what your cash flow requirements are likely to be. 

Cash flow consultants, like me, take a deep dive into your books and strategize ways to limit liability, offset debt, increase profits and keep your cash flowing. Following a review of your financials, I provide you with the tools and education needed to feel totally empowered while making informed business decisions regarding your company’s cash flow.
Cash Flow Forecasting App

An exciting new way to manage your cash flow is coming soon! I am creating a custom cash flow forecasting app to allow users to take control of their cash flow by uploading their own information to gain immediate insights.  Users will be provided an 8 month view into the future of what cash requirements will look like!

 

Want to be part of our soon to launch beta test?

 

Total Cash Clarity: Yesterday, Today and Tomorrow | 303.835.7992 | Contact Us

How do you know you have a cash flow problem?

Do you have financial concern over making payroll, managing debt, making purchase decisions, or collecting on outstanding accounts?

If you answered YES to any of these, sign up today for your complimentary consultation.

Get Cash Flow Clarity.  Total Empowerment.  Get moving towards your goals today.

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