Cash flow what?!

So, you’ve done it. You’ve set up your own small business. This is by no means any small feat. Doubtless, long hours of contemplation, organization, effort, and cash have been invested in its formation. You should be proud of your achievements so far!

However, be wary. This is the stage where many small business owners falter. They become a little too comfortable, kick their feet up and relax, thinking that all of the hard work is out of the way. It is absolutely paramount for your business’ success is that you continue putting in plenty of hard work to keep your business in the black and bringing in constant profits.

So, where to start now that the basics are all set up and ready? Well, a huge factor in your business’ success is cash flow management. Here’s everything you need to know in regards to cash flow management in order to keep everything running smoothly.

What is Cash Flow?

First things first: what is cash flow? Well, consider cash flow the lifeblood of your business. It’s what keeps everything running smoothly; after all, without cash, profits are nothing. Cash flow itself is the movement of funds in and out of your business and should be tracked weekly, monthly or quarterly.

All you have to do to be successful is to remember one thing: the amount of money coming into your business should always outweigh the amount going out. When your business is in this state, it has a “positive cash flow”. If you find that your outgoings total more than your incomings, your business has a “negative cash flow” and you need to start looking at changing your business practice to convert it to a positive flow.

Business Line of Credit

Every good businessperson knows that you have to spend money in order to make money. There will be many times when you want to launch a new product, service or marketing campaign that you are certain will increase sales and turnover increased profit. However, you will often run into an issue: you don’t have the funds at hand to set these things in motion and consequently can’t reap their benefits down the line.

This is where comes into play. A business line of credit is a type of revolving capital available to business who need access to cash fast. The concept is similar to that of a credit card: you borrow funds and pay them back in small installments or at a later date. However, there are perks that place this practice above a standard business credit card. First off, you can receive cash rather than mere credit.

This comes in useful in you need to pay contractors or stockists in cash. It allows you to spend your funds wherever you see fit without any hiccups. Secondly, the interest rate or APR is likely to be much lower than that offered by a credit card provider, meaning that you pay less money back in the long run.

Perfect! So, if you have around $50,000 in annual revenue and your company has been operating for more than six months, this may well be a great way for you to guarantee a controlled cash flow into your business.

Controlling your cash flow ensures that your business’ finances are always secure. Focusing on this area ensures that you are regularly brought up to date with how your company is coming along and will prevent the chances of sudden failure and debt. It also makes sure that you have plenty of cash on hand to invest in the right areas at the right time.

How do you manage your cash flow?