Most small businesses only have the cash flow to handle about a month’s worth of expenses. For many, cash flow management is the hardest of the many tasks that face businesses in their early days. The job of handling business cash flow can make or break a small business in its first few months or years of operation.
So if you run a business and have questions about how to manage cash flow, where are you to turn? Where can you get the best tips on managing cash flow for your business? What are the need-to-knows when it comes to cash flow?
Well, you can stop wondering. Read on to find out all you need to know about business cash flow.
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What Is Cash Flow Management?
Let’s start with the basics. At its most fundamental level, all business cash flow is, is the amount of money you have entering and leaving your business. Like the flow of a river, it has various tributaries and exits, but at the end of the day you need more coming in than going out in order for the whole thing to keep going.
What cash flow isn’t is revenue. Revenue is a measure of how much money you have coming into your business. That’s a very important stat, but it isn’t the whole picture. You need to know how much you have going out in order to come to grips with a complete picture of your business. Otherwise, you only have half the picture.
That’s why managing cash flow is so important to all businesses, especially smaller ones. When it comes down to it, it’s what decides whether your business lives or dies. In some ways it is your business!
The Best Cash Flow Management Tips
So what’s a small business owner to do when it comes to cash flow management? Well, there’s plenty of tips, and you should always try to learn more. But here are the fundamentals.
First of all you need to negotiate, negotiate, negotiate! The basic trick is to maximize income while minimizing outgoings. That means if you can negotiate with your suppliers and payees in such a way that you can stagger your payments as much as possible, you’re already doing important work.
On the flip side of the coin, negotiate with people paying you in such a way that your income comes in as fast as possible. Think of the river metaphor again: you want a huge torrent at the river’s source and a tiny trickle at its exists. That’s good cash flow management!
Managing Cash Flow the Smart Way
Those are the basics of smart cash flow management. Like we said, though, there’s no end to the clever tips and tricks you can put to use as a savvy business owner in order to create a positive cash flow situation. It’s both an art and a science!
Just make sure you always keep that river in mind!
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