Entrepreneurs know that while their business may be profitable, cash is still king, says John Roberts, vice president for small business at Scotiabank.
“Putting a solid cash flow plan in place gives entrepreneurs control of what flows in and out,” he adds.
Here are five tips so business owners can do just that.
1. Understand your situation: Cash flow is an essential aspect of your business and its future success. You need a full picture of the factors that will impact your cash flow — including sales volume, payment terms, and business expenses.
2. Adapt: Your cash flow projection is something that will constantly evolve. Keep your accounting records up-to-date and create cash flow reports frequently to see what the impact of the changes could be. Whether you’re expecting your cash flow to grow or shrink, knowing any change in projected cash flow gives you the time to create a financial strategy.
3. Identify cash flow killers: Every business is going to have expenses, but there are methods to keep them under control. Regularly review your expenses and suppliers to look for ways to lower costs. For example, negotiating with your suppliers for early payment discounts or extended penalty-free payment terms. Using a credit card with an extended grace period can be an effective way to slow the payment process.
4. Take advantage of cash flow boosters: Consider loyalty credit cards that reward you for your everyday business transactions like purchasing office supplies, entertaining clients at restaurants and filling up at the gas station. Even small savings can add up to a large cash reward at the end of the year that you can reinvest into your company.
5. Avoid unnecessary expenses: Take advantage of credit cards that include a comprehensive suite of insurance benefits including travel insurance, rental car collision, and purchase security and extended warranty for you and your small business so you don’t have to make an extra payment every month.