Cash is king not matter the size of a business. However, cash is even more important for small businesses because of the difficulty of being able to borrow from financial institutions when they run low on cash.
There are several small steps small businesses can do to ensure that they do not run of out of cash fast.
Prepare a cash flow projection:
That is be able to determine for the next three months, six months and even one year how much cash will be coming into your business. This way you will be able to determine well ahead of time if you are going to be having cash challenges anytime in the future and prepare for it well before it happens.
Improve cash collection:
Improve how fast you collect cash for job done or services delivered. Do not allowed your business to be owed money for too long or else you will start running into cash challenges. If you are being owed for too long, be willing to offer discounts as incentives so that you can collect your money on time.
Manage cash outflow
Do not be quick to pay for services or items bought if there is an opportunity to delay payment till a later date. There is no crime in owing money, just ensure that you have cash to pay when it is due. If you are able to ensure that cash collection is fast while cash outflow is slow, you will be have cash to run your business and take advantage of rising opportunities. However, you have to ensure that do not damage your credit worthiness in the way you manage your cash outflow.
Standing overdraft
If you are able to manage your cash flow very well, then it will be easy to set up a standing over draft order with your bank in such a way that in periods you are temporary out cash; you will be draw down on such overdraft.
If you take these steps above, as a small business, you will always have cash to take care of your immediate business needs and challenges as well as expand your business.
