Running a business is a balancing act between revenues and expenses. Knowing where your money comes from and where it goes is essential. The goal of any business is to improve positive cash flow.
Tracking and managing these cash flows helps with operating, planning, budgeting, and investing. The best way to see if you are on target is through good cash flow management involving inflows and outflows and understanding how each value is intertwined.
Let’s talk about cash flow management, what it is, how to track it, and multiple ways you can improve and manage cash flow in your business—something every business owner should know!
What is Cash Flow Management?
Managing cash flow is simply tracking the cash coming into your business and cash going out of your business. Of course, it’s a bit more detailed than that.
From tracking how much cash is coming and going, we gain an understanding of the dynamics of what makes our business tick. Our success is tracked through revenue. Our efficiencies are noticed by looking at our expenses.
Tracking and understanding cash flow is an ongoing task. While preparing a Statement of Cash Flows provides a snapshot of a period in time, keeping track of cash flow on a daily basis is critical.
That way, you always know where you stand with your finances and can be warned of any cash flow problem that may arise.
Cash Flow and Small Businesses
Managing cash flow is tricky for small business owners. A business often starts with an outflow of cash. You are ordering inventory and supplies, getting equipment ordered and set up, and hiring personnel.
Then your product catches on, and you start to ramp up sales. If all goes well, you are soon starting to make more than you spend. A negative cash flow at the beginning becomes positive later on.
Throughout the course of running your business, you might need to make tweaks to stay cash flow positive, and there are several ways to do this.
Three Ways Businesses Generate Cash
It’s important to understand where cash comes from. There are three main areas that a business generates cash:
- Cash from operations is cash created through the course of doing business. This includes selling products or services or through depreciation or amortization. Expenses affecting cash include interest payments, tax payments, salaries, tax payments, and the purchase of inventory. Cash can also be realized by cutting costs associated with these expenses. We’ll give you some suggestions about how to do this shortly.
- Cash from financing is cash created or raised through activities outside the regular scope of business. This may include stock repurchases, dividend payments, or offering bonds to raise cash.
- Cash from investing is cash from property, plant, and equipment. More money would be generated from the sale of such assets. The sale of investment securities, the collection of loans, and insurance proceeds would positively impact cash flow.
How Businesses Track Cash Flow
There are several ways to calculate cash flow, and it’s helpful to use a few methods to provide valuable information:
- Statement of Cash Flows tracks cash flow from all three areas—operations, investing, and financing. With information from the Income Statement and Balance Sheet, there are a few different methods to calculate cash flows, providing valuable information.
- Cash flow projections, also referred to as cash flow forecast, are used to budget and plan for the future. It includes forecasting numbers for several months in the future.
Businesses can track cash flow on the Statement of Cash Flows, but a more detailed cash flow spreadsheet can be used to track each inflow and outflow.
Formal cash flow statements are a snapshot in time, but a spreadsheet can be a dynamic document updated every time money exchanges hands.
Track types of revenue and costs vs. costs of goods sold. Break down expenses into fixed and variable costs. Fixed costs such as rent, insurance, and fees are the same every month.
Variable costs are a bit trickier to predict as they change each month. Some examples are utilities, supplies, shipping costs, money spent on marketing, and sometimes payroll costs. The spreadsheet will also show if you are turning a profit.
Cash Flow Management Strategies For When Money is Low
If you find yourself with a shortage of positive cash flow, you can either increase your inflows or decrease your outflows. Here are some suggestions:
- Increase your cash inflows by selling more products or services. Explore marketing strategies to grow your customer base. Add more offerings and upsell your current customers.
- Reduce outflows by cutting costs. Some ideas might be searching for a lower-cost supplier of inventory or negotiating for bulk supplies. Businesses also can affect their bottom line by examining discretionary spending. Examples include paid lunches, company cars, or free donuts on Fridays. Examine each expense to see whether it is necessary or could be done cheaper.
- Examine your inflows to see when they are hitting the books. If customers are delaying payment, this will impact your bottom line. Improve payment systems or deliver goods only when the payment is received.
- Apply for loans or search for investors to grow your business. This will add cash to your bottom line. Make sure you use the investment in ways that will increase cash flow, as the loan will also influence your outflows.
- Outflows can be affected by timing as well. Try to juggle your expenses, so they hit your accounts on a steadier basis. One way is to see if your insurance or inventory can be paid every month rather than in one lump sum.
Benefits Of Cash Flow Management
Creating a steady cash flow is excellent for your mental state and the bottom line. You will be able to grow your business organically and creatively, rather than through reactions.
Some business owners panic when they perceive a slow month for income or when a hefty invoice comes in that they weren’t expecting.
The rising price of inventory is a considerable stress as well. Preparing a cash flow statement and projection will ensure there are no surprises.
Even if things seem bleak, you will be equipped with the knowledge to deal with them. It’s better to shop for a loan when things are going well than when you are months behind on the rent. A cash flow statement will let you see shortfalls coming.
Know When to Grow
When things are going well, and you see a positive cash flow for several months, you will be able to take advantage of a current trend or new technology. Extra cash on hand could signal the perfect time to grow your business by adding a new product or service.
Your cash flow projection lets you look ahead to determine the best time to make a move and how that move will affect cash flow in the future.
Presenting a Statement of Cash Flows or a cash flow projection shows forethought when applying for a business loan or requesting a better rate from a supplier. Lenders and creditors can see your ability to repay funds. In addition, transparency builds trust.
Improve Budget Accuracy
Cash flow projections can help with budgeting. The numbers on a cash flow projection are more accurate than an actual budget. Budgets tend to miss items or not itemize them.
For example, you can budget dollars for office supplies or marketing, but what exactly does that mean? You can break those down into specific categories, and places to cut become more apparent.
A cash flow statement and projections come from previously prepared statements where everything is laid out, so budgeting is based on actual numbers rather than guesses.
How to Improve Cash Flow
While cash flow can be affected by a single item, numerous small steps can help build cash flow over the long term.
Implement a few of these suggestions, brainstorm some of your own, and see how it affects your bottom line.
Focus on Inventory Control
It’s essential to have enough inventory to meet customer demand, but not too much to cause spoilage or storage issues.
Inventory purchased in bulk might save money in the long term, but then you will need a space to store it—do you have warehouse space available, or will you need to spend money on renting one?
On the other hand, if you run out of a critical component, you may need to pay a premium to get it quickly and delay production until the item arrives.
An inventory control system can help you track what you have on hand and how much you are paying each month. Negotiate a monthly payment or purchase with your supplier to keep inventory costs steady.
Lease, Don’t Buy
When you buy a piece of equipment, your initial outlay of money is high, but you can depreciate the cost of the equipment over time. Buying equipment is also required when a piece of equipment is unique or customizable.
But leasing makes a lot of sense if you are purchasing equipment that will need to be replaced in just a few years and you have the cash to make the monthly payments.
Leasing may also allow you to acquire better equipment that you might not be able to afford with a bank loan.
Consider a Line Of Credit
If you need to pay bills before a client pays or want to take advantage of growth opportunities, a line of credit will immediately give you access to funds.
If you don’t need it, you don’t have to use it, and you can use only as much as you need and then pay it back quickly. Weigh the options of paying with cash or on credit, as they both affect your bottom line.
Send Out Invoices Right Away
Businesses may set a schedule where they bill a client once every two weeks or once a month. If the client uses your services early in the period and you wait until this set billing period, you are waiting for revenue.
Invoice customers as soon as possible and encourage quick payment. You may set up online payments or credit cards for this purpose. You can also ask customers for a deposit and get some money upfront.
Look For Alternative Revenue Streams
Brainstorm ideas to expand your existing products and services.
Maybe add a complementary product or service or a whole new line. Perhaps you can add a subscription, an upgrade to an existing service, affiliate marketing on your website, a limited-edition item, or a one-time project.
If they make sense, new revenue streams can breathe new life into your company and bring in new clients that love your new product and are introduced to your existing line.
Negotiate Your Payments With Suppliers
It’s always a good idea to check with your suppliers to see if you can negotiate your price and payment terms. If you know you have cash coming from clients at the first of the month, see if your suppliers will accept payment a week or two later.
Use a Business Credit Card
A business credit card can serve a two-fold purpose. First, it frees up cash for other purchases. Second, a credit card may offer cash back for certain purchases.
Take care to keep in your budget and not run up a large amount of debt; that money will still be accounted for on your business expenses, just not as cash.
Use a High-Interest Savings Account
When you find yourself with a positive cash flow or extra income, stick it in a savings account with a high-interest rate. Your money can grow while you determine your next move. Even in the short term, you can earn some extra cash.
The Bottom Line
No matter what your business is, you need to track cash flow. Depending on the economy, you might need to track cash very carefully. A cash flow statement, cash flow projection, or a detailed spreadsheet will provide you with valuable information on your finances.
To help you keep more of what you make, check out more articles here. And don’t forget to sign up for our mailing list to be notified of new articles as soon as they are published!
Kuendesha biashara ni tendo la kusawazisha kati ya mapato na gharama. Ni muhimu kujua mahali ambapo pesa zinatoka na mahali zinapoenda. Lengo la biashara yoyote ni kuboresha mtiririko wa fedha chanya. Kufuatilia na kusimamia mtiririko huu wa fedha husaidia katika uendeshaji, mipango, bajeti, na uwekezaji. Njia bora ya kuona kama wewe ni juu ya lengo ni kwa njia ya usimamizi mzuri wa mtiririko wa fedha unaohusisha inflow na outflows na kuelewa jinsi kila thamani ni intertwined. Hebu majadiliano kuhusu usimamizi wa mtiririko wa fedha, nini ni, jinsi ya kufuatilia, na njia nyingi unaweza kuboresha na kusimamia mtiririko wa fedha katika biashara yako - kitu kila mmiliki wa biashara inapaswa kujua! Usimamizi wa Mtiririko wa Fedha ni nini? Usimamizi wa mtiririko wa fedha ni kufuatilia fedha zinazoingia katika biashara yako na fedha zinazotoka nje ya biashara yako. Bila shaka, ni kidogo zaidi ya kina kuliko kwamba. Kufuatilia kiasi cha fedha zinazokuja na kwenda, tunapata uelewa wa mienendo ya biashara yetu. Mafanikio yetu yanafuatwa kupitia mapato. Ufanisi wetu unaonekana kwa kuangalia gharama zetu. Kufuatilia na kuelewa mtiririko wa fedha ni kazi ya kuendelea. Wakati kuandaa taarifa ya mtiririko wa fedha hutoa picha ya kipindi katika muda, kuweka kufuatilia mtiririko wa fedha kila siku ni muhimu. Kwa njia hii, unaweza kujua wakati wote ambapo wewe kusimama na fedha yako na unaweza kuwa onyo la matatizo yoyote ya mtiririko wa fedha ambayo inaweza kutokea. Cash Flow na Biashara Ndogo Usimamizi wa mtiririko wa fedha ni vigumu kwa wamiliki wa biashara ndogo ndogo. Mara nyingi biashara huanza kwa pesa nyingi. Unapanga vifaa na vifaa, unapanga na kuanzisha vifaa, na kuajiri wafanyakazi. Bidhaa yako inashika, na unaanza kuongeza mauzo. Ikiwa kila kitu kinaenda vizuri, utaanza kupata pesa nyingi kuliko unavyotumia. Mtiririko wa fedha hasi mwanzoni inakuwa chanya baadaye. Wakati wa kuendesha biashara yako, unaweza kuhitaji kufanya tweaks ili kukaa mtiririko wa fedha chanya, na kuna njia kadhaa za kufanya hivyo. Njia Tatu Biashara Zinaunda Fedha Ni muhimu kuelewa ambapo fedha hutoka. Kuna maeneo matatu ya msingi ambayo biashara inazalisha fedha: - Fedha kutoka kwa shughuli ni fedha iliyoundwa kupitia mwendo wa kufanya biashara. Hii ni pamoja na kuuza bidhaa au huduma au kwa njia ya depreciation au amortisation. Gharama zinazoathiri fedha ni pamoja na malipo ya riba, malipo ya kodi, mishahara, malipo ya kodi, na ununuzi wa hesabu. Fedha pia inaweza kutambuliwa kwa kukata gharama zinazohusiana na gharama hizi. Tutakupa mapendekezo kadhaa juu ya jinsi ya kufanya hivyo hivi karibuni. - Cash kutoka fedha ni fedha zilizotengenezwa au zilizopandwa kupitia shughuli nje ya wigo wa kawaida wa biashara. Hii inaweza kujumuisha ununuzi wa hisa, malipo ya gawio, au kutoa dhamana ili kukusanya fedha. - Fedha kutoka kuwekeza ni fedha kutoka mali, kiwanda, na vifaa. Fedha zaidi zitatokezwa kutokana na uuzaji wa mali hizo. Uuzaji wa dhamana za uwekezaji, ukusanyaji wa mikopo, na mapato ya bima yangeathiri vizuri mtiririko wa fedha. Jinsi Biashara Track Cash Flow Kuna njia kadhaa za kuhesabu mtiririko wa fedha, na ni muhimu kutumia mbinu chache kutoa habari muhimu: - Taarifa ya Cash Flows kufuatilia mtiririko wa fedha kutoka maeneo yote matatu - shughuli, uwekezaji, na fedha. Kwa taarifa kutoka taarifa ya mapato na Balance Sheet, kuna mbinu chache tofauti za kuhesabu mtiririko wa fedha, kutoa habari muhimu. - Mtiririko wa fedha makadirio, pia inajulikana kama utabiri wa mtiririko wa fedha, ni kutumika kwa bajeti na mpango kwa ajili ya siku zijazo. Inatia ndani kutabiri idadi kwa miezi kadhaa katika siku zijazo. Biashara inaweza kufuatilia mtiririko wa fedha kwenye Taarifa ya Mtiririko wa Fedha, lakini spreadsheet ya mtiririko wa fedha ya kina zaidi inaweza kutumika kufuatilia kila inflow na outflow. Taarifa rasmi za mtiririko wa fedha ni picha ya muda, lakini spreadsheet inaweza kuwa hati ya nguvu updated kila wakati fedha kubadilishana mikono. Fuatilia aina ya mapato na gharama dhidi ya gharama za bidhaa kuuzwa. Punguza gharama katika gharama za kudumu na za kubadilika-badilika. Gharama za kudumu kama vile kodi, bima, na ada ni sawa kila mwezi. Gharama zinazobadilika ni ngumu zaidi kutabiri kwani zinabadilika kila mwezi. Baadhi ya mifano ni huduma, vifaa, gharama za usafirishaji, pesa zinazotumiwa kwenye uuzaji, na wakati mwingine gharama za mshahara. Karatasi ya tafiti pia itaonyesha kama wewe ni kugeuka faida. Mkakati wa Usimamizi wa Mtiririko wa Fedha: Ikiwa una tatizo la mtiririko wa fedha, unaweza kuongeza mafuriko yako au kupunguza mafuriko yako. Hapa ni baadhi ya mapendekezo: - Ongeza mapato yako ya fedha kwa kuuza bidhaa zaidi au huduma. Kuchunguza mikakati ya masoko ya kukua msingi wako wa wateja. Ongeza matoleo zaidi na kuuza wateja wako wa sasa. - Kupunguza outflows kwa kupunguza gharama. Baadhi ya mawazo inaweza kuwa kutafuta muuzaji wa gharama ya chini ya hesabu au kujadili kwa ajili ya vifaa vya wingi. Biashara pia inaweza kuathiri mstari wao wa chini kwa kuchunguza matumizi ya hiari. Mifano ni pamoja na chakula cha mchana kulipwa, magari ya kampuni, au donuts bure siku ya Ijumaa. Chunguza gharama zote ili uone kama zinahitajika au zinaweza kufanywa kwa gharama nafuu. - Chunguza mapato yako ya ndani ili uone ni lini yanapofika kwenye vitabu. Kama wateja wako ni kuchelewesha malipo, hii itakuwa na athari kwa mstari wako wa chini. Kuboresha mifumo ya malipo au kutoa bidhaa tu wakati malipo ni kupokea. - Omba mikopo au tafuta wawekezaji ili kukuza biashara yako. Hii itaongeza fedha kwenye mstari wako wa chini. Hakikisha unafanya biashara kwa njia ambayo itaongeza mtiririko wa fedha, kwani mkopo huo pia utaathiri mtiririko wako wa nje. - Mtiririko wa nje unaweza kuathiriwa na wakati pia. Jaribu kuharakisha gharama zako, ili ziweze kugonga akaunti zako kwa njia thabiti zaidi. Njia moja ni kuona kama bima yako au hesabu inaweza kulipwa kila mwezi badala ya kwa kiasi kimoja. Kuunda mtiririko wa fedha wa kudumu ni bora kwa hali yako ya akili na mstari wa chini. Unaweza kukuza biashara yako kwa njia ya kikaboni na ya ubunifu, badala ya kupitia athari. Wamiliki wa biashara fulani huogopa wanapoona kwamba mwezi wao wa mapato umepungua au wanapoona kwamba wanapata gharama kubwa sana ambazo hawakuwa wakizitarajia. Kupanda kwa bei ya hifadhi ni mkazo mkubwa pia. Kuandaa taarifa ya mtiririko wa fedha na makadirio itahakikisha hakuna mshangao. Hata mambo yaonekana kuwa mabaya, utapata ujuzi wa kukabiliana nayo. Ni afadhali kununua mkopo wakati mambo yanaendelea vizuri kuliko wakati wewe ni miezi nyuma juu ya kodi. Taarifa ya mtiririko wa fedha itakuruhusu kuona upungufu unaokuja. Wakati mambo yanaendelea vizuri na unaona mtiririko mzuri wa fedha kwa miezi kadhaa, utaweza kutumia faida ya mwenendo wa sasa au teknolojia mpya. Fedha za ziada kwenye mkono zinaweza kuwa ishara ya wakati mzuri wa kukuza biashara yako kwa kuongeza bidhaa mpya au huduma. Utabiri wa mtiririko wa fedha unakuwezesha kuangalia mbele ili kuamua wakati bora wa kufanya hatua na jinsi hatua hiyo itaathiri mtiririko wa fedha katika siku zijazo. Kuwasilisha taarifa ya mtiririko wa fedha au makadirio ya mtiririko wa fedha inaonyesha utabiri wakati wa kuomba mkopo wa biashara au kuomba kiwango bora kutoka kwa muuzaji. Watoa mikopo na wakopeshaji wanaweza kuona uwezo wako wa kulipa fedha. Kwa kuongezea, uwazi hujenga uaminifu. Kuboresha bajeti Usahihi Cash mtiririko makadirio inaweza kusaidia na bajeti. Nambari kwenye makadirio ya mtiririko wa fedha ni sahihi zaidi kuliko bajeti halisi. Bajeti huwa na kukosa vitu au hazitajwi kwa undani. Kwa mfano, unaweza kuweka bajeti ya vifaa vya ofisi au uuzaji, lakini hilo linamaanisha nini hasa? Unaweza kugawanya hizo katika makundi hususa, na sehemu za kukata zinakuwa dhahiri zaidi. Taarifa ya mtiririko wa fedha na makadirio yanatokana na taarifa zilizotengenezwa hapo awali ambapo kila kitu kimewekwa, kwa hivyo bajeti inategemea idadi halisi badala ya dhana. Jinsi ya kuboresha mtiririko wa fedha Wakati mtiririko wa fedha unaweza kuathiriwa na kipengele kimoja, hatua nyingi ndogo zinaweza kusaidia kujenga mtiririko wa fedha kwa muda mrefu. Tumia baadhi ya mapendekezo haya, fanya brainstorming na uone jinsi inavyoathiri matokeo yako. Lengo juu ya Udhibiti wa Hifadhi Ni muhimu kuwa na hifadhi ya kutosha ili kukidhi mahitaji ya wateja, lakini si sana kusababisha uharibifu au masuala ya kuhifadhi. Vifaa vilivyonunuliwa kwa wingi vinaweza kuokoa pesa kwa muda mrefu, lakini kisha utahitaji nafasi ya kuhifadhi - una nafasi ya ghala inayopatikana, au utahitaji kutumia pesa kukodisha moja? Kwa upande mwingine, ikiwa una sehemu muhimu, huenda ukahitaji kulipa malipo ya ziada ili kuipata haraka na kuchelewesha uzalishaji hadi bidhaa hiyo ifikie. Mfumo wa kudhibiti hesabu unaweza kukusaidia kufuatilia kile unacho na kiasi unacholipa kila mwezi. Kufanya mazungumzo ya malipo ya kila mwezi au ununuzi na muuzaji wako ili kuweka gharama za hesabu thabiti. Lease, Don't Buy Wakati unaponunua kipande cha vifaa, gharama yako ya awali ya pesa ni ya juu, lakini unaweza kupunguzwa gharama ya vifaa kwa muda. Ununuzi wa vifaa pia inahitajika wakati kipande cha vifaa ni ya kipekee au customizable. Leasing ni njia nzuri ya kununua vifaa ambavyo vinahitaji kubadilishwa baada ya miaka michache na unaweza kulipa kila mwezi. Leasing pia inaweza kukusaidia kupata vifaa bora ambavyo huenda usingeweza kununua kwa mkopo wa benki. Ikiwa unahitaji kulipa bili kabla ya mteja kulipa au unataka kutumia fursa za ukuaji, mstari wa mkopo utakupa upatikanaji wa fedha mara moja. Kama huna haja yake, huna haja ya kutumia, na unaweza kutumia tu kama vile unahitaji na kisha kulipa nyuma haraka. Fikiria jinsi ya kulipa kwa pesa taslimu au kwa mkopo, kwa kuwa zote mbili huathiri matokeo yako. Kutuma Invoices Mara moja Biashara inaweza kuweka ratiba ambapo wao muswada mteja mara moja kila wiki mbili au mara moja kwa mwezi. Ikiwa mteja anatumia huduma zako mapema katika kipindi na unangojea hadi kipindi hiki cha bili, unangojea mapato. Weka ankara kwa wateja haraka iwezekanavyo na kuhamasisha malipo ya haraka. Unaweza kuanzisha malipo ya mtandaoni au kadi za mkopo kwa kusudi hili. Unaweza pia kuwaomba wateja kuweka amana na kupata pesa mapema. Tafuta Njia Mbadala za Mapato Fikiria mawazo ya kupanua bidhaa na huduma zako zilizopo. Labda kuongeza bidhaa au huduma ya ziada au mstari mpya kabisa. Labda unaweza kuongeza usajili, kuboresha huduma iliyopo, uuzaji wa washirika kwenye wavuti yako, bidhaa ya toleo la kikomo, au mradi wa wakati mmoja. Kama zina maana, mapato mapya yanaweza kuingiza maisha mapya katika kampuni yako na kuleta wateja wapya ambao wanapenda bidhaa yako mpya na kuanzishwa kwa mstari wako wa sasa. Kufanya mazungumzo ya malipo yako na wauzaji Ni daima wazo nzuri kuangalia na wauzaji wako kuona kama unaweza kujadili bei yako na masharti ya malipo. Ikiwa unajua kuwa una pesa kutoka kwa wateja wako mwezi wa kwanza, angalia ikiwa wauzaji wako watakubali malipo wiki moja au mbili baadaye. Tumia Kadi ya Mkopo ya Biashara Kadi ya mkopo ya biashara inaweza kutumika kwa kusudi la mara mbili. Kwanza, inatoa pesa kwa ajili ya ununuzi mwingine. Pili, kadi ya mkopo yaweza kutoa pesa taslimu kwa ajili ya ununuzi fulani. Jihadharini na kuweka bajeti yako na usikubali madeni makubwa, pesa hizo bado zitahesabiwa kwenye gharama za biashara yako, sio kama fedha. Kwa mfano, kama una akaunti ya akiba yenye riba ya juu, unaweza kuwa na pesa nyingi za ziada, na unaweza kuweka pesa kwenye akaunti ya akiba yenye riba ya juu. Pesa zako zinaweza kukua wakati unaamua hatua yako inayofuata. Hata kwa muda mfupi, unaweza kupata pesa za ziada. Kwa ujumla, haijalishi ni biashara gani, unahitaji kufuatilia mtiririko wa fedha. Ikitegemea hali ya uchumi, huenda ukahitaji kufuatilia pesa kwa uangalifu sana. Taarifa ya mtiririko wa fedha, utabiri wa mtiririko wa fedha, au karatasi ya maelezo ya kina itakupa habari muhimu juu ya fedha zako. Ili kukusaidia kupata zaidi ya kile unachofanya, angalia makala zaidi hapa. Na usisahau kujiandikisha kwenye orodha yetu ya barua ili ujulishe makala mpya mara tu zinapochapishwa!