Cash is King! Improving Cash Flow for Business Success
In the royal realm of business, cash flow largely influences your business success, hence, the ruler that never loses its crown! No offense to the rest of your financial statements, but cash can make or break the game.
Why is Cash the Royal Highness?
Think of cash as the oxygen that your business breathes. Your profits may look like a gold mine on paper, but if you don’t have cash to pay the bills, that gold mine is just a tourist trap with no gold left to dig.
Cash Flow vs. Profit: The Great Debate
Profits are nice, loyal little figures that give you warm feelings at the end of the quarter. But cash flow is what keeps the business running. You can’t pay your suppliers with “future potential” or convince your employees to accept “good vibes” as a salary. It’s the cold, hard cash that keeps the wheels turning.
Why Cash Flow Management Matters
Here’s a little secret that business owners sometimes miss: profit is just a story, but cash flow is the whole plot! Profit tells the story of how you did during a period, cash proves (or validates) your story.
A wise person once said, “Revenue is vanity, profit is sanity, but cash is reality!” It’s true—revenue numbers might be high-fiving each other in your books, but if cash isn’t flowing in to meet your expenses, your business is in trouble. Managing your cash flow is not just a survival tactic; it’s a strategy to grow, adapt, and thrive.
Long Live the King!
Remember, while profits may look like a flashy suit, cash is the comfy pair of shoes that actually gets you where you need to go. So, treat your cash like royalty, protect its throne, and make sure it always reigns supreme in your business kingdom. Long live the King! 😊
How to Manage Cash Flow Like a Pro!
With the right strategy, you can keep your cash crowned! Let’s dive into some simple ways to manage your cash flow like a pro.
1. Speed Up Your Invoicing: send out invoices as soon as the job is done! The sooner you bill your customers, the sooner the cash rolls in. Think of invoicing like ordering pizza—the longer you wait to place the order, the hungrier you get!
2. Set Clear Payment Terms: make sure your payment terms are clear, simple, and, most importantly, short. Net 30 is great, but net 15 is even better! If your customers love your product, they won’t mind a tighter payment deadline.
3. Keep an Eye on Expenses: you need a close watch on your expenses. Cut out any unnecessary expenses or those “nice-to-have” subscriptions you signed up for during that one productivity kick last January that you have not used since then. If it’s not driving growth, it’s driving costs.
4. Build a Cash Reserve: think of your cash reserve as a financial safety net. Having a little stash on the side can save you from those embarrassing moments. Aim for at least 3-6 months’ worth of expenses to keep things steady.
5. Put Cash Reserve to Use: rather than have your cash reserve sitting in a chequing account, you can put it to use by transferring a portion to a high-yield interest savings account, buying a short-term GIC, or any other non-complex investment. This will generate some interest income which increases both your profit and cash – it’s a double win!
6. Delay Payments Strategically: you don’t have to pay every bill the minute it lands on your desk. Use your payment terms to your advantage! Pay on the due date, but ensure you don’t damage any relationships with your vendors by stretching too far.
7. Forecast Your Cash Flow: like checking the weather forecast before a beach day, you should be forecasting your cash flow before making big decisions. It helps you predict when you might run into a dry spell or when to prepare for the flood of income. It’s not about fortune-telling; it’s about being prepared!
Keep the Flow Going!
Managing cash flow isn’t rocket science; it’s about keeping your eyes on the money and ensuring more is coming in than going out. By being proactive and strategic, you can turn cash flow from a trickle into a steady stream. Remember, in the game of business, it’s not just about making money; it’s about keeping it flowing!
PS: we have a simple cash flow forecast to share with you for free! Yeah, we want to help your business succeed….. you’re welcome 😊 Send us an email and we will share the file immediately!