Reviewing Your Finances to Fix Business Cash Flow ... - Fast loans

All too often, small business owners undervalue the importance of cash flow, and prefer to measure their success based on the number of active jobs, the size of their contracts and their profit margins. While these are all very important metrics to focus on, cash flow is an equally as important indicator of how well a business is doing.

As a business owner, it?s important for you to understand the ins and outs of your cash flow, and continually review your finances so that you know where your business stands financially. To avoid uneven cash flow, the following are some things to consider.

Review your cash flow statement

The first step is to know where you stand with your cash flow. The best way to do this is to review your business?s cash flow statement, which shows the movement of money in and out of your business over a specific period of time. Since this statement shows the actual amount of money that enters and leaves a business, it?s a far more effective metric than simply reviewing how much remains at the end of a particular period of time.

By understanding your cash flow, you will be far better equipped to handle not only factors that are preventing you from making profit, but also those that are actively inhibiting you.

Understand how cash flow problems occur

Understanding how problems with cash flow occur in the first place, and then reviewing your budget to eliminate the sources, is the best defence for your business finances. When it comes to the spending side of cash flow, the major issue is overhead spending for the business. Don?t forget about any major expenditures such as during periods of growth, which is when you need to invest in new equipment, supplies and labour.

In addition, you need to know where your money is coming from. For example, if you provide products or services on credit, then you?ll need to consider unpaid balances when you review your cash flow.

Keep the cash flowing

Now that you know where your cash flow problems are coming from, you can take steps to rectify them. For example, minimising your fixed expenses, being creative in handling unexpected expenses, streamlining business processes, and managing your accounts receivable more effectively are all ways you can improve your cash flow.

Have a backup plan

Even though you have reviewed your finances and have a diligent plan for managing your cash, there may be times ahead that are hard to predict. That is why it?s important to have a backup plan that includes several sources of financing. There are short-term financing solutions ? such as lines of credit, short-term loans, credit cards, or cash loans ? as well as long-term or secured loans for the more long-term investments.

Manage growth

Consistent and controlled growth is the only way you can smooth out the wrinkles in your cash flow. When an opportunity for growth comes up, make sure you review your finances and plan carefully with cash-flow projections in mind. Make sure each decision you make with regards to growth is a conscious decision that is always backed up by your cash-flow projections and budget.

By reviewing your cash flow and budget constantly, you will always know where you stand financially, and will ensure you enjoy every moment of growing your business.

Source: http://www.spotloans.com.au/blog/2012/11/15/reviewing-finances-fix-business-cash-flow-problems/

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