Do you have a small business and feel like you could improve your cash flow strategies? If the answer is yes – then today is your lucky day, my friend! Our most recent podcast discusses 5 cash flow strategies with our special guest, Christie Varner. Christie is an accidental accountant for small to medium-sized businesses and is creating a course for small business owners all about your finances. She is also the owner of Victory Advisory Services and has tons of experience helping small businesses gain control of their finances. Gaining control of your cash is a critical component to the success of your business. In fact, 82% of businesses fail because of cash flow issues. This will be a conversation on HOW to master cash flow so that you can get steps ahead in your business!
First things first, when we use the term CASH, we are talking about money in all the forms you may receive it – credit cards, PayPal, Shopify, checks, and even actual dollar bills.
Cash flow is just what it sounds like – the money that goes into and out of your business. Positive cash flow means you have more money coming in than going out, which is obviously the goal for each of you! However, the timing of when you have cash matters too. These simple strategies below will help with cash management and financial goals!
Increase the average sales to existing customers! They are your easiest place to get more money. Is there a simple add-on that you could offer to customers? For example, a photographer might offer presets or a jewelry designer could offer jewelry cleaner. Typically, the 80/20 rule applies to businesses – Which states that 80% of your sales come from 20% of your customers. If you are selling something higher-end, like wedding planning, for example, you might figure out who your top customers were this past year and ask them for referrals. Another way to increase cash coming in is to collect your money faster. A sale is meaningless if we don’t get paid. Take an honest look at your contracts. Do you have failed payments? Make a plan to take care of failed payments, even if that means picking up the phone and calling the customers yourself.
Decrease your cash outflow by eliminating some bills! For this strategy, all you need is access to your bank and credit card statements. Go back through your business account’s bank statement and credit card charges for the last year. You can print these out or do it online! First, write down the things you have paid that are extras for your business. Things that are nice, but not necessary. Next, write down the ones that served you well in the past but you don’t really need anymore – start right now canceling those expenses. I know it’s easy to think that it’s only $50 a month, but just a few of those can add up. Lastly, look at your expenses one more time. Is there anything else there that you don’t really need? The better you get at evaluating your business’s bills this way, the more excited you’ll be to save. You may even be surprised to see where you have been spending money that you could have saved.
We’re getting serious now. Thanks to your taking action on tips 1 & 2, you’ll now have worked out some ideas of how to increase cash coming in and save on bills. NOW we need to make sure you have cash at the right time. Businesses can be profitable, but if you don’t have money in the bank when payroll comes up or your major supplier has to be paid, you’ll be out of business. Create a monthly spreadsheet that states the money you have coming in and the money you have going out. If you won’t get paid for some of your services in the month you sell it, you don’t want to put it there. Only put the cash that comes in that month. Now you will do the same thing with each of those expenses. Put each of those expenses in the week where they are due. Once you do this, then use your calculator and add up all the money that comes in each week and subtract the money that goes out- That is your cash flow for the week! So now, you can see that some weeks are good and some weeks are not so good. This is how you MANAGE your cash flow by making payments when it makes sense for your business.
Even with great plans and strategy, sometimes things don’t go as planned and cash runs low. This is common in business! It’s good to acknowledge that and make a plan. If you are low on cash and need a quick infusion to make payroll, for instance, you can do a few things. If you have a line of credit with your bank, draw on it. You can map out paying it back in the cash flow chart. But for now, that may get you through this payroll. You could also do a quick sale for immediate cash! Sell off some inventory to get cash in the bank now.
Some of you still are probably hearing these words in your head: “I’m terrible at math,” “I’ve managed my business without understanding this so I’ll just keep winging it,” or “I just don’t have time for this.” Those are all just excuses. It’s a narrative that’s run through your brain but it doesn’t make it true! You have managed your business without this, but can you see now how incredibly insightful this will be for you? And yes, it will take some time to set this up at first, but once you get the hang of it, it really just becomes a habit. Can you see how much more information you will have about your business and how you will know when you can make your purchases? There is gold in understanding these numbers.
If any of this is speaking to you, tune in to the podcast on Apple or Spotify to hear Christie and Cam go more in-depth on how to help with cash flow. We hope that this episode serves you and helps grow your business. Looking for more financial advice? Head over to episode 21 to learn about mastering your numbers. Christie also extended a special freebie to our listeners! So, grab her plug + play freebie! You’re a rockstar and we’re here to help in any way we can. Thanks for reading!
Brooke Hicks | Render Co.
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