5 tips to control your cash flow
Understanding the ins and outs of cash flow is essential to the financial success of your business. That being said, when it comes to monitoring the funds moving to and from your accounts, actually controlling that cash flow is easier said than done.
Use these five tips to keep an accurate measure on your cash flow!
- Calculate your breakeven point. As a business owner, one of the key benchmarks that should never be ignored is your breakeven point. The breakeven point is when the revenue and income of your business is equivalent to the costs associated with doing business. Here is what you need to know to calculate your breakeven point:
- Figure out the fixed costs. This is the cost associated with producing the products or services offered by your business. (Ex: employee salaries, rent, insurance etc.)
- Add up the variable costs. These are the costs from your business that fluctuate. (Ex: cost of materials, utility costs, commissions from sales, etc.)
- Determine your price per unit. This is the average costs of each of the services and wares your business provides.
- Unit sales. This is the estimated amount of products/services you expect to sell.
- Monitor monthly. At the very least, you should check the cash flow of your business every month to ensure that it has a positive cash flow (more cash coming in than leaving) instead of a negative cash flow, which is more cash is leaving your business than coming in. These check-ins can expose trends and help discover your high points and low points throughout the year. The low points, seasonal or year-round, are periods of time where financial assistance can help you maintain a steady cash flow throughout the year.
- Keep up through quick payments. When it comes to maintaining a positive cash flow, ensuring that you receive payments in a timely manner is essential for your business. While you cannot control when customers send in their payments, you can implement services to streamline incoming revenue. Tools such as point of sale (POS) terminals, and other telephone or web-based processing systems speed up the time it takes to process transactions on your side of the exchange. Maintaining outgoing transactions is another key component to an accurate cash flow, incorporating products like ePayroll will help automate your payroll and give you a clear picture on your finances.
- Find financing to float during the lows. Even well established businesses have points where their cash flow hits a low. Access to funds to guide you through tough times ensures that your cash flow won’t reduce to a trickle. Consider starting a Business Line of Credit – you’ll have extra cash on hand when you need it, all without the hassle of applying for a loan in order to meet a short-term expense.
- Target your existing customer base. Increasing sales is one great way to stabilize your cash flow, but some customers are easier to target than others. Because after all, acquisition of new customers is time-consuming, especially when you’re trying to get them in the door. So instead of putting forth effort to pull in new customers, focus your effort on those that are already interested or using your business. Customer Appreciation Days, special discounts, and loyalty programs are great ways to get customer to return.
Though cash flow is a very large factor of your business, learning where it stands and taking steps to improve it will greatly help your business in the end. Find the perfect solution for your business by completing a few questions today with Business Analyzer.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its affiliates and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.