When it comes to success as an entrepreneur, effectively managing business cash flow is one of the most important things you can do.
It’s not just about what comes in. And it’s not just about pinching pennies. It doesn’t matter how much is coming in if you mismanage it. If you are trying to grow your business, it’s important to stay on top of cash flow. Here are three tips that can help you with more effectively managing business cash flow:
1. Pay Attention to Where and When Your Money is Coming From
First of all, you need to pay attention to where and when your money is coming in. Often, we just look at the numbers to see how much is coming in. Yes, it’s important to know how much is coming in relative to what’s going out. But that’s not the whole picture.
Managing business cash flow also includes knowing where the money is coming from, and when it arrives. Do you know the sources of your income? Dig into the numbers to get an idea of where the money comes from. This will help you identify the most effective sources of income, and help you see where to more profitably direct your energy.
On top of that, it makes sense to know when you have money coming in. Do you have an idea of what to expect in terms of timing? Look for patterns in the times you are likely to receive revenue and other income. While you can’t predict everything, cash flow management is easier when you have more information.
2. Payment Timing
Once you have an idea of what to expect, and you have a general idea of where your money is coming from and when it’s coming in, you can try to manage your payment timing.
Payment timing is essential to managing business cash flow. If you are given a choice about when to pay a bill, choose a time when you can be reasonably sure you will have the funds.
You should also consider payment timing when billing your clients. One of the best rules of thumb is to try to get people who owe you money to pay as soon as possible. Get part of the payment up front so that you have some cash in hand. Then see about arranging what you owe to others to a time when it’s more convenient for you.
3. Diversify Your Revenue Streams
When managing business cash flow, diversifying your revenue streams is vital. This has been important for my business. Do what you can to make sure that you are ready, just in case one of your sources of revenue dries up. You don’t want to be stuck with all of your eggs in one basket.
You can do this by cultivating different clients, investing in different ventures, and by developing different products. When you have different income streams, you are more likely to stick around. Develop a business model that allows you to try different things so that you aren’t stuck if something doesn’t pan out or if things change.
The better you are at managing business cash flow, the more likely you are to financially thrive as a business.
Check out some of our other business tips