As a business owner you may not think that your cash flow is something you need to visit on a regular basis, but considering that 82% of businesses that fail, fail due to poor cash flow management, this may be something you want to rethink. It is an incredibly important part of your business and ultimately contributes to your business’s financial success.

Step one to successful cash flow management is having a clear understanding of where money flows into and out of your business. It also involves a bit of forward-thinking and keeping an eye on the long-term so that you are not caught off guard by any cash flow issues. In addition to being aware of these issues, you need to have a plan in place to avoid or confront them in the first place.

Check out the tips below for avoiding cash flow surprises in your business:

1. Remember, profit ≠ cash
   Just because a business is profitable doesn’t mean cash flow management won’t be its demise. If your expenses are higher than they should be, or you find that you are reinvesting most of your profit back into the business, then your cash flow is sure to take a hit. Understanding where your business spends or reinvests its cash will help you to make the necessary adjustments to your cash flow management to ensure a successful financial future.
   
   
2. Understand your future cash flow position
   Forecasting when you expect cash to enter and exit your business is very important for the cash flow of your business. Not only will this help you to gain an understanding of your future cash flow position, but it can also help you to identify any issues and the steps required to combat them before it’s too late.
   
   
3. Consider if seasonality affects you
   Seasonality can largely impact your business’s cash flow. If you are running a seasonal business then the majority of your expenses, such as inventory and staffing, will come before any income is made. In this case, forward planning is incredibly important. By forecasting your cash flow for the coming months, you will be able to set aside some funds for any unexpected circumstances, and by keeping an eye on the trends in your market you will be able to manage your stock and hire accordingly.
   
   
4. Expect the unexpected
   Unexpected expenses and unanticipated costs are inevitable in business, and can all impact your cash flow, effectively instantly. It’s not possible to predict every scenario your business may experience but having a plan in place to prepare for these possibilities is important. Some ways to plan ahead for the unexpected include building an emergency fund as a financial cushion for your business, getting business insurance, and even ensuring outstanding customer service to keep your clients coming back.
   
   
5. Employ the best billing practices
   Having every single client pay their invoice on time unfortunately just isn’t the reality of business. A late payment can become a problem for your cash flow if you are counting on that income to cover some of your business expenses. To minimize late payments from your clients, it is important that you brush up on the best business billing practices. This includes, but is not limited to, asking for a down payment, utilizing cloud-based invoicing software, following up with clients who are late on their payments, and planning for instances where a client refuses to pay.
   
   
6. Taxes are inevitable
   As a business owner, it is your responsibility to make sure your taxes are filed for the correct amount and at the right time. Failing to do this can result in penalties, interest payments, or even an audit. Make sure that you are aware by which date your taxes need to be paid, whether you file monthly, quarterly, or annually. Use last year’s taxes to give you a ballpark figure for this year and make sure you have put money aside to make sure your taxes get paid on time.

For help to identify the problem areas in your cash flow management, get in touch today! As a Scaling Up coach, I will work with you to utilize the Power of One concept to help you accurately determine which financial levers to pull to put the most value back into your business.