Running a small business successfully is not any easier today than it has been in the past, although the rise of ecommerce and all manner of new technology have certainly opened the endeavor up to many more people than before. However, getting registered and setting up an ecommerce site is where the easy part ends.
Business is still business, and small companies need to begin the uphill struggle on the way to growth. Real company growth takes considered and strategic investment, as well as the shoring up of resources to create a stable base upon which growth can be realized.
Nevertheless, a major problem with many small businesses is that they get too comfortable with this stable base. Not grasping the opportunity to grow is a frequent problem among smaller businesses, and it nearly always leads to stagnation and, ultimately, the company’s collapse.
The opposite problem can be just as bad though, and making the risky investments needed for growth before the company is ready is another thing that can sink a small company of limited resources.
The Importance of Cash Flow
And there is perhaps one thing which is more important than any other when it comes to realizing stability. A healthy cash flow is, in fact, much more important than profit margins. Profit margins represents the overall revenue a company is bringing in. A stable cash flow means being able to meet all financial obligations as and when they need to be addressed.
You might make enough profits overall to pay all your expenses, but if you are ever waiting for the money to come in before you can see to this or that financial obligation, then a stable cash flow still eludes you.
This is not to say that there are not services and measures that can help you get there. The most effective is invoice factoring, which involves having a third-party company pay the invoices of a business, on the understanding that they will be paid back when the clients pay the value of the invoice. This frees up revenue when it is needed and improves cash flow.
Nonetheless, debt factoring service fastFACTR out of Utah advise that, as useful as this service undoubtedly is, you can only claim to have stable cash flow when you don’t need it any more. One of the ways of reaching this point is to improve profit margins (of course), but another is careful cash flow management. It’s remarkable how cash flow can be adversely affected by simple mismanagement.
Tips for Cash Flow Management
With that in mind then, here follows some top cash flow management tips:
Be Smart with Bills
Paying bills strategically is effective way to improve cash flow. You should extend payables for as long as possible. If a bill doesn’t need to be paid for two weeks, then pay it in two weeks. You might well require that money for more urgent things now.
Create the Right Payroll Cycle
You should have a pretty clear understanding of your revenue stream and just when revenue is coming in. You should base your payroll cycle around this to ensure you always have the funds to pay employees at this time.
Encourage Quick Payment
Which can also mean penalizing overdue payment. You should negotiate with clients and always follow up on payment requests. Late payment is the enemy of a healthy cash flow.
These few tips will take you a long way in managing your cash flow effectively. Following these, with a mind to increasing profits in time, is the way to eventually have the stable base upon which a company can be grown.