The Beginning Business Owner’s Guide to Cash Flow

Starting your own business is exciting, but for most first-time entrepreneurs, it’s overwhelming. Even if you create the best business plan and account for every cost, you’re likely to encounter some surprises that can jeopardize your new venture’s cash flow. Planning for potential hiccups is key to maintaining a steady cash flow, and luckily, there are several useful money management strategies you can employ. With the help of the Kimberly J. Howard, CFP Blog, learn how you can sustain your business, manage its finances effectively, and keep its cash flowing steadily.

Minimizing Expense Fluctuations and Optimizing Inventory Management and Invoicing

Cash flow is the total sum of incoming and outgoing payments in a given time period. One of the best ways to keep cash flow positive is to minimize expenses that can have a big impact. Rather than buying equipment, for example, De Dietrich Process Systems explains that you can rent it. This frees up some of your business’ capital, which you can then invest in a high-yield savings account, allowing it to grow further.

Inventory is closely linked to your cash flow, too. Your inventory can be a source of positive cash flow, but accumulating inventory requires an investment of capital. Striking a balance is a skill that eludes many beginning business owners, but, as IndustryWeek points out, you can start by optimizing your inventory management system with specialized software. This can help you manage this essential component of your enterprise without negatively affecting your cash flow.

Keep in mind the role that your clients play in your cash flow. Your revenue depends on timely payments from your customers, and they depend on prompt invoices from you. With an update to your invoicing process, which starts with an invoice template, you can minimize the delay between a transaction and its payment by invoicing your clients with correct and complete information as soon as possible. You can even incentivize prompt payment by offering discounts.

Managing Your Business’ Finances Effectively

When you’re managing a company, you may eventually need access to funding, and financing typically requires the submission of profit and loss statements proving your business’ income. If you don’t invoice your clients consistently and keep accurate financial records, you’ll have difficulty securing funding.

To ensure you have easy access to financial insights, you should invest in a simple solution such as accounting software that monitors cash flow and automatically generates reports. A balance sheet report, for example, is an important document that can help you understand your cash flow more easily. The right accounting system can produce this data so that you don’t have to sit and calculate expenses.

Perhaps the most important cash flow strategy, though, is maintaining consistency. It’s in your business’s best interest — and your clients’, too — to establish clear and consistent policies regarding payments. If you don’t impose payment deadlines and don’t establish expectations with clients, your cash flow will surely suffer.

Keeping a Positive Cash Flow

Running an enterprise involves countless moving parts, and as an entrepreneur, it can be daunting to oversee each of them. It’s important not to lose sight of the most essential tasks, though. You must ensure that your business runs smoothly by managing its cash flow effectively.

With the right software, prompt invoice practices, and accurate financial reports, keeping a positive cash flow should be no problem — even for a beginning business owner. You can be confident in your company’s finances when you have the right tools at your disposal.

The Kimberly J. Howard, CFP Blog shares thoughts, insights and financial planning advice from KJH Financial Services. Reach out to Kimberly today for more info!

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5 Tips for Starting a Business After Financial Setbacks

Financial setbacks are never pleasant, but they don’t have to be fatal when you’re an entrepreneur. It’s true, financial setbacks are part of becoming a successful entrepreneur. The trick is learning how to navigate those setbacks so that you can position yourself for success in the future. Kimberly J. Howard, CFP explains how you can bounce back.

1. Learn From Your Mistakes 

Most founders who’ve experienced significant financial setbacks, or even lost their business, made substantial mistakes along the way. Mistakes are part and partial of growing as an entrepreneur. Bill Gates’s first company failed, executives removed Steve Jobs from his own company, and Walt Disney lost $15,000 on a company that failed before starting Disney. Look at your mistakes, ask others for advice, and learn from them. 

2. Create a Detailed Business Plan

Having a business plan is essential before starting a business. Using other people’s money, such as angel investors, can increase your chances of success. However, angel investors often require a solid business plan before investing their money. Your business plan should include the following: 

  • Marketing strategy. How will you advertise your company to potential customers?
  • Competitor analysis. Be honest about your competition, but detail how you’ll beat them. 
  • Financial projections. Have some precise economic forecasts for the first three years.
  • Details about your business. Detail your product and service and how it’ll serve your potential customers.
  • A section on HR. Discuss employee requirements and how you’ll meet those requirements. 

3. Use Free Tools to Keep Costs Low

You’ll need to utilize free tools during the startup phase to keep costs down. Fortunately, there are many free tools to choose from, including:

  • Website builders. If you’re looking to keep costs minimal, look for free website builders that offer easy design with a clean look.
  • Accounting software. Free accounting software is helpful, and ProfitBooks offers precisely that. 
  • Word processing. If you need to edit documents for your business, you can use Google Docs
  • Invoicing. A free online invoice generator makes it easy to create and customize invoices that you can quickly send via PDF.

4. Find Mentors

Everyone faces financial setbacks when they start a business. Some people overcome their setbacks, yet others never start a company again. Finding mentors is the best way to learn from your mistakes. 

Look for various business networking events throughout the year where you can meet business leaders. Use these events to find mentors with advice on how to overcome financial setbacks. 

5. Don’t Fear Failure

You shouldn’t be scared to fail when you start a business. Although failure is somewhat likely depending on your risk levels, fearing failure will achieve nothing. In the future, use disappointment to motivate you to succeed and switch failure from a negative into a positive. 

From Setback to Success

Financial setbacks will always be part of an entrepreneur’s journey, but these tips can help you recover quickly. Use your mistakes to grow and learn, stick to a detailed business plan, use free tools to keep costs low, find a mentor and don’t let fear of failure consume you. In no time, your new venture will be up and running!