If you run a company, you understand how quickly problems can develop from a lack of cash flow. The inability to pay rent, fulfill payroll, or fix malfunctioning equipment can seriously hurt your bottom line. Luckily, there are plenty of tactics that will lessen the odds of funds going dry. Here are a few that are considered worthy.
Calculate Risks
When it comes to entrepreneurship, there are no guarantees. Customers come and go. Plus, any number of unforeseen events has the potential to cause everything to go sideways. A large order that had been expected might get canceled. Staffers could relocate and decide they’re better off working for another employee closer to their new homes. Longtime clients suddenly become insolvent and are no longer able to pay. Planning for these possibilities and others should help mitigate the inevitable fallout.
Enter your cash flow variables into a digital spreadsheet. Next, see what would happen if a hypothetical situation unfolded by deleting the relevant figures. The fiscal impact should be immediately apparent. Put the necessary dollar amount into an emergency account. When a crisis emerges, you’ll have funds available to recover from the repercussions.
Maintain Separate Accounts
One of the biggest mistakes entrepreneurs make is mixing personal and business expenses. One reason why this happens is that the initial financing often comes straight from the owner’s pocketbook. Another possibility is an overall lack of financial literacy.
Separating business and personal finances keeps budgeting simpler. Many business credit cards provide management reports that help with financial forecasting. The fact that you’re less likely to suffer the wrath of the IRS is yet another reason for dividing financial pots.
Reexamine Inventory
No business runs without sales and supplies. More customers create a need to spend more in these departments. If you expect a rush of clients to be heading your way, it presents an opportunity to make bulk purchases that are cheaper by design. If not, negotiating with vendors could produce similar results.
Alternatively, your venture’s busy season may be ending. Consider reducing your orders, especially on items that have expiration dates. Shopping around for more affordable options is another way of reducing expenses. Generic brands often have the same level of quality as their commercial competitors.
Cash flow problems create significant headaches for ambitious capitalists. Awareness of this reality ought to spur actions that prevent experiencing insufficient funds. Know what measures can keep the issue at bay and remain trouble-free.
