Are you running your business hoping you’ll have enough money to pay your expenses when they come due? Does not having enough cash on hand worry you?
It’s time to review your balance sheet to see if you can make improvements. “Successful entrepreneurs know that while their business may be profitable, cash is still king when it comes to growing their enterprise,” said John Roberts, Vice President for Small Business at Scotiabank. “Putting a solid cash flow plan in place gives entrepreneurs control of what flows in and out.”
Understand Your Position:
It’s imperative to have cash flow in your business to guarantee its future success. Look at everything that has an impact including sales volume, payment terms, and business expenses.
Be Prepared to Make Adjustments
Keep your accounting up to date and analyze your expected cash flow to see the impact of the recent changes. Whether you are expecting your cash flow to increase or decrease, knowing any change in expected cash flow gives you the time to create a strategy to meet your obligations.
Identify Where Your Cash is Going
Every business has operating expenses, and it’s important to keep an eye on what is being spent. Regularly review your vendor payments and look for ways to lower costs. For example, negotiate with your suppliers for early payment discounts or extended penalty-free payment terms. Using a credit card to make payments is something to consider, but only if you are paying the debt off each month. Using a card with a cash-back bonus can also help as you can use that amount to reduce the card balance.
Avoid Unnecessary Expenses
Take advantage of credit cards that offer additional benefits including insurance for travel and rental car collision so you don’t have to pay an extra fee for these services.
Hire Your Children
If you are a sole proprietor and have minor children, consider hiring them to help with tasks in the business. They can earn up to the standard deduction for the year without owing any taxes, and no payroll taxes are due until their 18th birthday. Doing this can reduce the amount of income tax you owe (and the earnings your children make can be used to pay for their expenses that you would have paid out of your funds).
Reviewing your cash flow position regularly is important to make sure you are on track in your business and will have the funds available to pay your expenses. If you need help with this function of your business, contact us today to help with your accounting. We look forward to assisting you!
Photo courtesy of freedigitalphotos.net/Gualberto107
