Are you struggling to make your cash work for your business?
Make cash flow management your top priority and a daily habit.
Like all well-seasoned entrepreneurs will tell you ‘look after the pennies and the pounds will look after themselves.’ Building good cash flow management and budgeting habits now will help your small business weather the peaks and troughs of these turbulent times.
Countless studies show that poor cash management is the cause of businesses going bust. Cash is the lifeblood of a business. Without it, you cannot hire or pay employees, buy inventory, expand your operations, or secure a line of credit or financing.
When we talk about habits, as we all know not all habits are ones we should continue to ignore. Bad habits have the potential to significantly impact our lives for the worse and for business if you do not correct them could mean the end of your dream of independence. If managing your finances is not easy for you, it tends to be put in the long list of to dos and neglected until something forces your hand. It becomes a massive task that could lead to massive issues when business is lean. One entrepreneur once told me they were insolvent for three months and did not even know until the accountants got involved. Would you want to put your lifeblood and your passion on the line because you could not make the time to keep your cash flowing.
Remember like getting fit the best way to start with is small adjustments repeated day in and day out.
Starting on a journey to great financial habits has the potential to lead us towards financial success and life in general, in the shorter and longer run.
Successful people are simply those with successful habits. – Brian Tracy
5 highly effective habits to manage your cash flow
To help your business avoid becoming just another statistic, here are how you manage your cash flow habits:
1. Keep your bookkeeping up to date
There should be no such thing as outdated books. If you can help it, please avoid it. It’s such a critical part of managing your expenses.
If you are reconciling daily rather than weekly or even monthly your financial data is more relevant which will allow you to plan better. Making more educated financial decisions about your budget rather than relying on hunches and ensuring you don’t play find the error come tax time. You can also ensure there is no theft or employee expenses misuse and learn to cut down on spending where you can as you can see in smaller chunks where your cash is headed
With up-to-date accounts you can quickly work on an accurate budget, business plan and it helps make it easier to forecast your cash flow, especially when you are using the MoolahMore cash flow app.
Are you looking at getting a loan or filing your taxes? Keeping your books up to date is a practice that you need to religiously follow to avoid any delays or a beast which you put in the too hard basket.
2. Schedule Weekly Invoicing
If you want to keep your business running, you need to make sure you don’t run out of cash. So, to avoid delays and interrupting your workflow, schedule time in your calendar and stick to it.
The faster you invoice, the sooner you can collect . Your accounting software has built in automation to help guide you here, check out the help sections on email automations to help send reminders to your customers of coming due dates.
Pro-tip from entrepreneurs the faster you quote the more likely you will get new business, as customers don’t want to have to chance you for the business they have already decided they need.
3. Don’t let outstanding invoices slip through the cracks
How do you do your collection? As you may already know, the answer to that question depends on the customer. While you have probably have set up a process already you also know there are exceptions you need to make based on season, customer or even the unforeseen events like a pandemic.
Work out when to send reminders. Do you want it a day before the invoice is due, or maybe three days after? Maybe email reminders aren’t good enough. It wouldn’t hurt to perhaps give them a call.
If you can find the time, work out the average number of days it takes to collect the payment from your customer, so that you can automate your collection process in your accounting software to remind your customers and use it to forecast your cash flow accordingly.
4. Track your cash flow performance
Start to get a better understanding of your collection and spending. Once a week to review your cash flow during the last 30 days within your main forecast in MoolahMore. That will help keep a bit more control on what has happened and what is coming up. Setting targets for yourself and rewarding yourself on sticking to your budget will all help with your cash flow performance.
MoolahMore’s graphs can make it even easier for you as you can quickly see what cash position you are in within a couple of seconds of loading the app. Make it a habit by loading it up in the morning with your coffee and emails. Use it as a calendar of which suppliers or customers you need to contact to ensure you prioritize outstanding payments or invoices for the week. Budgeting can be gamified by attempting to ensure the cash balance stays in the green and your customer stays loyal!
5. Forecast your cash flow
Keep track of your sales trends and upcoming expenses, and prepare regular cash flow forecasts to identify potential cash flow shortages in the near future.
Once you’ve prepared a cash flow forecast, use MoolahMores planning function to run ‘what if’ scenarios to understand how prepared your cash flow will be to sustain certain changes in events, such as decreases in sales.
Our cash flow forecasting app, Moolahmore can help you about cash flow forecasting. Contact us on how to set up your first cash flow forecast and start planning smarter and grow your business faster with Moolahmore.
Again, cash flow is the life blood of your business. It’s never too late to start building good habits in managing your cash flow better. Make sure you put these habits into your schedule and you will get results.
With MoolahMore as a simple, easy to use regular tool to make your business sign