What’s your new year resolution for your business? If you’re like a lot of small businesses in 2016, you’re no doubt hopeful and perhaps optimistic about growth. According to the 2015 U.S. Bank Annual Small Business Survey, small business owners are more confident about the future of their businesses now than at any time in the past six years.
This is all great, but how’s your cash flow? Did you run into any issues in 2015? Did you have to forego a large purchase, chase non-paying clients or even delay your accounts payable to overcome a lack of cash? If you plan any growth or even just hope to remain stable in 2016, you need to ensure that your cash flow remains positive throughout the year.
To help you out, here are five cash flow resolutions that can help you plan for and mitigate any cash flow problems in 2016.
1. Build a Cash Flow Forecast
Cash flow problems often come as a surprise, so the best way to avoid them is to spot them and mitigate the impact ahead of time. You’ll need to create, maintain, and constantly revisit your cash flow forecast. This exercise will help you build an operational picture of when cash is due to come in, when it’s due out, and what money you anticipate will be left over. It can account for seasonality, peak-expense periods, and so on. You can also factor in those pesky late-paying clients and how that impacts your cash situation. Check out my tips for creating your cash flow forecast and analyzing your findings.
But don’t stop there. Learn why a cash flow statement (which is different to a forecast) can also benefit your business in 2016.
2. Wave Goodbye to Spreadsheet Financials
Still using Microsoft Excel for all things business accounting? Excel is fine for some of the basics, but as your business grows, Excel isn’t designed to grow with you. Excel’s limitations become even more apparent when you compare it to the alternative—scalable and intuitive online accounting software with all the reports, dashboards, and tools you need built in. You’ll not only save time, but you’ll spot problems (cash flow issues, late-paying clients) and benefit from a synchronized view all your financial data, including banking, timesheets, invoices, P&L statements, and more. Market leaders for small business in this space include FreshBooks, Quickbooks, and Xero.
Read more in 5 Reasons Not to Manage Your Accounting with Excel and then check out How You Can Make the Switch to Online Accounting Software.
3. Make Cash Flow a Priority Wherever You Are
Another great benefit of making the move away from Excel is that because online accounting tools are cloud-based, you can access them from anywhere and on any device. Even if you’re on the road, you can keep an eye on the flow of cash, late payments, etc.
That’s not all! There are a number of apps that help you manage your finances on-the-go. Mobile business banking can help you manage cash flow by setting up alerts to notify you as critical activity occurs, so you don’t have to keep checking your account for important transactions. Expense tracking apps also make it easier to capture your expenses and process them immediately. You can also use tools like Square to sell and make cash while you’re out and about.
For more and links to tools that do all this, check out these tools that can help you manage your cash flow on the road.
4. Manage Your Expenses Like a Pro
Organizing your expenses is one of the best uses of any small business owners’ time. Sounds like common sense, but I’ve run into business owners who wait until tax time before they log their entire year’s expenses, relying on memory alone!
If you’re at all interested in maximizing your tax deductions, then you need to be all over your expenses as they happen. That starts with understanding what you can expense and what you can’t. For example, did you know that you can deduct not only the cost of the printer ink that you buy at Staples, but the mileage that you incur to get there and back? Make sure to separate your business and personal expenses (that means two bank accounts and two credit cards, if possible). Then, of course, there are a range of tools that you can use to track everything as you go.
To learn more about all of this, read my blog post: How to Plan for Business Expenses (and Improve Cash Flow).
5. Shake Up Your Invoicing and Collections Process
Another small business practice that surprises me is shoddy invoicing, whether it’s only invoicing once a month (or even less), using paper invoices rather than electronic, not chasing late payments, or not having a process in place to deal with tardy clients. Getting paid on time is absolutely critical to small businesses’ success, and this starts with invoicing correctly. It’s something we often write about at Fundbox. Here are a couple of blogs that can help you perfect your invoicing process:
If and when that invoice isn’t paid on time, here are seven direct, yet diplomatic, ways to handle a slow-paying client.