Cash flow management in small business has been compared many times as a roller coaster. Many small business owners talk about this “feast or famine” or “cash flow roller coaster” when it comes to their revenues. Strategies and tactics of managing the cash in your small business can make the difference in profit and being in the black. It can be the difference in whether or not you will sleep restfully at night, take a vacation, or even pay yourself. These cash flow management tactics can help turn a cash flow roller coaster into a smooth ride.
Cash flow management tip 1: Check in with your state of mind
Unless you are aware of your state of mind when you are making decisions about the money, you’ll likely to stay on the roller coaster. When you are worried about when the next check will come in, you may find yourself in the famine mode of thinking, being afraid of not enough cash, thus perpetuating the problem.
Do you find yourself making any of these bad cash flow management decisions when sales are great and the money is abundant?
- You think you have a lot of free cash and you over spend.
- You don’t consider the actual cost of delivering what you promised when you made the sale.
- You buy things that are not part of your plan because you forgot about your goals and your vision.
- You hire help too soon to get some relief only to let them go shortly thereafter.
Creating a plan that you have in front of you will help keep you on track, avoid making unplanned, unwise spending decisions and even out your cash flow.
Cash flow management tip 2: Check in with your emotions
Unless you take emotion out of your decision making process you won’t get off the cash flow roller coaster. Do you find yourself doing any of these things when the work dries up and so does the money?
- You take on less than ideal clients and are miserable working with them.
- You forget the value of the service you provide and undercharge just to get some cash.
- You search for the Band-Aid fix and don’t realize this lesson will soon be repeated.
- You invest in solutions hoping they will be the magic bullet you’re missing, only to feel deflated because they didn’t work out the way you thought they would.
When you regularly pay attention to the cash, when it’s coming in and when it’s going out, with Your Profit Plan as your guide, you begin to make decisions that are good for you and good for your business.
Cash flow management tip 3: Know your numbers
Before you make any plan, you always consider the things you will need. For example, if you take a vacation, you consider your budget, plan what you need to take, plan the route and make accommodations. There is planning involved, both financial and non-financial. In your business, you need a plan that shows you both the financial components as well as the non-financial areas that make an impact on the bottom line.
This is really the overall trick to cash flow management- understanding how the whole thing works so you know exactly where the dips are, when the tunnel is coming, and when you are climbing. Then, with this understanding, it will be with excitement that you throw your hands in the air and enjoy the ride.
The good news is that cash flow management it’s not as hard as you think. Let us show you how your ride can be like visiting the roller coaster in kiddie land, where the ups and downs aren’t as dramatic. In kiddie land, you can see what’s ahead, know what’s coming and what to expect. The ride isn’t so fast, so don't have that out of control feeling. This knowledge makes the ride more predictable and predictability around the cash in your business in the key to your independence and freedom.
If you want off the fincial roller coaster that is your business and get on a predictible ride, take this free profit potential quiz. Section three is all about cash flow, the others make for a easier ride.