The Cash Flow Conundrum: Tips For Keeping Your Company In The Clear

Managing cash flow is the core of sound financial planning and a critical component to any company’s success. Positive cash flow, or when a company’s incoming revenues outweigh its expenses, can ultimately determine the success or failure of your business.
 
For every businesses, managing cash flow is essential to survival. If a business cannot make their required payments to lenders, vendors and employees, their business will fail. But the cash flow heartaches of many small business owners are often just a result of poor cash and financial management.
 
The good news: cash management does not have to be complicated, and we’re here to help you simplify it. In this post, we’ll provide some simple and practical tips for stabilizing cash flow and achieving financial security in your company. Read on and we’ll show you how.

Stagger Payments

While in some ways it may seem counterintuitive to stagger payments, it is important to not pay everything at once. When reviewing bills, cutting and mailing all expense checks together can destroy your cash flow. Always be prepared for surprises when calculating payment plans. Stagger your payments in case of a surprise, and collect data to create a corporate, cash flow plan. Cash flow planning strategies are crucial to ensure you do not end up with a “zero” balance.
 
A helpful strategy for staggering payment is to setup three tiers for issuing checks:

• Must pay
  
• Important to pay
  
•  Flexible payment
  

 
These simple groupings will help prioritize and manage your payments in a sustainable, cash flow-friendly manner.

Pay With Current Cash, Not Expected Cash

Financial advisors often recommend responsible credit card usage – “don’t make purchases with cards if you don’t have the money to pay them off.” The same holds true in business — do not make payments based on promised cash receipts from customers. Doing this will ultimately lead to overdrafts or bounced checks.

Don’t Use Sales or Payroll Tax Money To Float Your Operations

While it may be tempting to buffer expenses with sales or payroll tax dollars, the reality is this practice could cost you more in potential penalties, fees, interest and time than simply securing short-term financing. Evaluate financing for your company and plan to deposit, rather than spend, sales or payroll tax money.

A Payroll Service Is Worth The Investment

Payroll is one of the most significant cash flow elements for small businesses. While outsourcing payroll tasks may seem unnecessary for a small company, it can streamline a normally daunting task, minimize liability concerns, and manage the collection and payment of payroll taxes.

Find the Right Bank and Maintain a Positive Relationship with your Banker

Not every bank is the same. Different banks prefer different types of clients. Their preference might be certain business sizes, industries or geographies. When times get tough banks have the tendency to pare back their clients to fit their desired target, often with little notice. Finding the right bank up front is crucial.
 
As a small businessperson, it is immensely important to maintain the relationship with your banker. Ensuring lines of communication remain open is vital to your financial stability. If you anticipate fees or a bounced check, contact your banker and discuss the circumstances. A proactive and honest approach can go a long way, and by understanding the situation, experienced bankers can provide helpful insight and strategies. Banks do not like surprises and it is best to deliver bad news before they stumble across it on their own.

Conclusion

While cash flow will likely continue to present challenges to many entrepreneurs, companies can find relief through some simple, practical strategies and best practice such as those outlined above. A little communication and planning can go a long way in improving your cash flow.

Let Lauber Business Partners Lead The Way

Lauber Business Partners is a trusted, well-equipped advisor to small and mid-sized businesses. Contact us today to learn more about our team and discuss what we can do for you and your bottom line.