Every now and then, all business owners will find themselves short of cash. The reason might be clients late payments, having to finance a large project, or an emergency. All sources of cash flow problems can be tackled by one thing: planning ahead. If you would like to be able to finance growth projects, survive slow months, and deal with emergencies, you need to improve your financial planning, and allocate funds for emergencies. Here are some tips to help you do it.
Investments
When all your business assets are tied up in projects, you might not be able to grow your company, due to the lack of funds available. In this case, you can benefit from a “rainy day fund” for your business. You might want to put some money aside for business emergencies, or invest in flexible funds.
One of the popular solutions among business owners today is investing into BitcoinIRA, as it offers great returns and easy access. Alternatively, you can invest in stock that can be liquidated fast to release funds for new projects. Business saving accounts can also provide you with an interest income, and you can keep investment funds secure until you need them.
Realistic Budgets
The main reason why many customers suffer from cash shortage is the lack of planning. If you cannot create realistic budgets, and overestimate your income, leave some expenses out, you are going to end up suffering from liquidity problems. If you know that you will have to make further investments in the future to grow your business, include this in your future budget.
Make sure that you review your potential sources of cash boost in your financial plans, so you are prepared for emergencies. If you tie up too much of your future revenue, you will have little money to use to grow your business and take your venture to the next level.
Manage Variable Costs
Keeping an eye on variable costs is the best way of maintaining cash flow in your business. If you need to hire temporary staff, make sure you have funds allocated for wages in the project. If you need to schedule property maintenance, you need to budget for this ahead.
At the same time, you must keep an eye on business expenses, and put a limit on them. If you have to pay your business tax each month, and it is a variable amount, you should get in touch with your accountant to get realistic estimates as soon as possible, so you can allocate funds for each expense. List all variable costs and create a budget or limit for each of them, so you avoid liquidity problems.
Get Deposits From Customers
If you have just received a large order of a new customer, you might be afraid of asking for a deposit in case you lose the project. You should make it clear to the customer that – as a small business – you are unable to fund all the materials and wages, and you will need to ask for a deposit. If the client has regular work and is used to outsourcing large projects, they will not say no. If they say that they cannot fund the deposit, you might be better off walking away from the project anyway.
Asking for upfront deposits is a common business practice, and it helps you protect your financial stability. Just imagine that you have to tie up 40 percent of your revenue in materials for three months. While you will eventually get your money, you might have problems paying your employees and suppliers before the project is finished.
Be More Flexible
To make sure your business can quickly react to changes in its operating environment and market demand, you might want to try implementing some flexibility. When your business has a quiet week, offer your workers time off that they can pay back when orders pick up. Work ahead of the schedule, so you can utilize your equipment and reduce downtime. Arrange maintenance, checkup, inspections, and training to quiet times, so you can make the most out of productive times.
It is almost impossible for small businesses to avoid temporary cash flow problems. If the issue is persistent, however, it is time to look at your budget, financial plans, and contracts. Make sure all customers are billed on time and they pay you when you need the money. Ask for a deposit on larger projects that require you to invest in materials, equipment, or extra wages, and you can successfully manage your cash flow.