5 Tips on Managing Your Cash Flow

cashflow

Today’s post is brought to you by American Express Canada.  They recently launched the  Amex for Business Canada Facebook Page so if you’ve liked my posts and videos in the past, please check out it out  and let me know what you think.

Today’s post is on cash flow management. You can run a profitable company but still go out of business because of poor cash flow management. Cash flow is all about when money comes in and when money goes out. If you’re paying too much money out before money comes in then you’re flirting with danger.

Here are my top 5 tips to help you manage your cash flow:

1) Project your cash flow

Try to map out for the year when you expect money to come in and when it’s going to go out. The regular monthly expenses are easy to predict but you don’t want to get caught off guard by large,  annual expenses that can sink your company. Government taxes, insurance, and equipment upgrades are three examples of annual costs which, if you don’t project and prepare for, can leave you scrambling last minute to come up with extra cash.

2) Try to get recurring revenue

The Holy Grail for many businesses is recurring revenue. If you’re trying to get investors into your company, one of the things they’ll look at is if your business model allows for recurring revenue. Having clients pay you on a regular basis makes it easier to plan your expenses and also helps reduce your stress levels! Try to move as many clients as you can to a subscription model where they make regular payments every month for the product /service that you are giving them. It doesn’t work for every business but you may be able to add on additional services that can be recurring revenue streams and bring in some money. That way,  if you end up in a cash crunch you’ll be better prepared.

3) Follow up on your accounts receivable

How long does it take for your clients to pay you? The easiest way to inject instant money into your company is to call up everyone who owes you and ask them to pay their bills. Over the long term you should consider eliminating clients who take too long to pay if they don’t change their ways. You can also offer incentives for clients to pay earlier either through a price discount or a value added product or service.

4) Keep an emergency fund

When you’re first starting up, all the money you make goes back into your business. After you get past the point of worrying if you’ll survive or not, you should start an emergency fund. This is money that you have on hand to get you through a cash crunch if you have an unexpected expense or your revenues fall short of projections. The common rule of thumb is to have three months worth of expenses in an emergency fund so you can continue running your business and pay your staff and suppliers while you get through the crisis.

5) Cut unnecessary expenses

It’s good practice to review your expenses every month or quarter to see if there’s anything you’re paying for that you don’t really need. Look especially hard at the recurring expenses and if you have staff, dig deep into their expenses with them. Are you still using everything on your expense list and getting good value in return? If you do a quarterly check you can almost always find at least one thing that you subscribed to and no longer really need. It’s too easy to sign up for something and forget about it – make sure you examine those expenses regularly and cut out the ones you don’t use.

Bonus: Negotiate with suppliers

The common wisdom around cash flow management is to negotiate better terms with your suppliers – either try to pay less or stretch out the time period so you can pay them later.

I usually disagree with this advice.

If your supplier is a large company and when you call in they can only find you if you give them your customer number, then fine – negotiate the heck out of everything you buy from them. Usually the big guys dictate the terms though and there’s very little wiggle room once you’re in a signed contract.

If on the other hand, your other suppliers are medium-sized companies, solo entrepreneurs, or self-employed contractors, these guys will feel the pain if you squeeze them too hard.

I’m a big believer in building loyalty with all of my contractors and suppliers. I rarely take the lowest price and I almost never negotiate terms. I want them to be part of my team and think of ways to make my business better. I want them to be loyal and love working with my company.

It’s not only a lot more fun working with people you like working with, it makes sure that they deliver the best quality product or service that they can – and if you ever have an urgent problem they’re going to bend over backwards to help you.

I usually pay my suppliers and contractors as soon as they send me an invoice even if they have 30 day terms attached. It might cost you a little more upfront but if you have suppliers who love working with you and feel like they’re a part of your team, you’re on your way to building a company that will be able to get through any crisis.

Once again, today’s post is brought to you by American Express Canada.  They recently launched the  Amex for Business Canada Facebook Page so if you’ve liked my posts and videos in the past, please check out it out  and let me know what you think.

About the Author

I #Believe in entrepreneurs.

80 Responses to “5 Tips on Managing Your Cash Flow”

  1. 5 Tips on Managing Your Cash Flow:
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  34. Devon says:

    Excellent advice. So many people just try to fly by the seat of their pants, but that is *not* the way successful businesses are run!

  35. Sonya says:

    True, it’s easy to put a lot of money into your business, and hope for the best… but will you survive until your business starts paying you back?

  36. Kawila says:

    I totally hear what you are saying Evan! Last year, I was doing fine with my monthly bills, but my business was profitable and taxes wiped out my progress in no time!

  37. Gina says:

    Recurring revenue is the way – I’m investigating ways to incorporate that in my business.

  38. Alexandria says:

    I’ve heard very good things about subscription models, and even Amazon sellers are encouraged to do that now.

  39. Harriet says:

    Ugh, I absolutely hate having to call up my clients and ask for money – even when it’s owed me. Is there a service I can call that will handle my accounts receivable for me?

  40. Cory says:

    Your third point brings up a question. In proper accounting, do I consider the bill as income when it’s issued, or when it’s paid? I see the obvious answer, but wonder what it means when trying to plan for my busiest and most lucrative times of the year.

  41. Sienna says:

    “Pay yourself first” was the first principle I was taught in personal finance, and it holds true for business as well. No matter how lean times are, be sure to save!

  42. Maya says:

    It’s true, savings can bail your business out when nothing else can. What happens when equipment fails during times of poor cash flow?

  43. Natasha says:

    It’s easy to get a little lax with your budgeting when times are good, but a year round plan will keep you on track.

  44. Jessica says:

    I like your idea of the quarterly check to cut unnecessary expenses. I’m going to do that right now.

  45. Rhia says:

    I’m in a service based industry, but negotiating with buyers is an interesting tactic that I hadn’t thought about before

  46. Meghan A says:

    Hmm… I’d love to see some subscription models that have worked for small businesses. I’d love to give it a try!

  47. Marshall says:

    I’m also very loyal with my suppliers, more for convenience than anything. I haven’t thought to negotiate with them.

  48. Mike says:

    Not sure if I’d want to negotiate with my suppliers – after all, how would I like it if my clients started haggling with me?

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  50. Christine Schmidt says:

    Wow! These are very informative tips on handling money and business especially for startups. It is so timely because I am planning to start my own business very soon. Thanks so much for the practical how-to’s and tips for business survival.

  51. Arn Swank says:

    Great tips you got here! I agree that in growing your business; you must take care of the key people around you as well. Good relationships with suppliers, investors, as well as your staff will make your business prosper all the more.

  52. Dorothy Stevens says:

    True enough! The real key to business success Is manpower. If you do not know hos to handle human resources; then your business is bound to crash.

  53. Jared Cruise says:

    Anticipating and preparing for the worst is great in managing youir cashflow.

  54. Rihanna Karide says:

    Balance is the key to everything even in the entrepreneurial world. You must learn to take risks; but to be able to quantify and spread your risks as well.

  55. Guinevere Tamara says:

    Money is really a big issue. I admire business gurus who relly share their expertise in the corporate playing field.

  56. Terry Bennett says:

    Fabulous advice about business and cashflow. These will surely help out all the other readers here and had some time to check out the papers.

  57. Red Clarion says:

    These ae very useful tips to making your money woirk for you and in maximizing the results of your hardwork…

  58. Brenda Kingston says:

    Thanks for the relevant tidbites of information you posted here. These are simple yet very effective guidelines on how to strategize on your investment options. Keep the posts coming!

  59. Mark Jameson says:

    I just would like to thank you for all the briliiant tips I’ve been getting from your blog. This has surely helped me in my own business. I would never have succeeded with flying colors without these tips! Cheers to us! :)

  60. Rod Bullock says:

    Businesses continue to flourish if you know how to handle your assets. I surely agree with what you say that you should really have confidence and trust in your people; because these are the people who would also help you climb your way up the success ladder. MANY THANKS!

  61. Lisa Schmidt says:

    These are all very inspiring for all entrepreneurs and those who want to set up their own businesses as well. Proper allocation of funds; as well as the ability to delegate roles effectively is the best things I learned from this post.

  62. Melissa Griffin says:

    Very creative and witty posts! Realistic and timely for today’s entrepreneurs.

  63. Adam Grayson says:

    The first time I stumbled upon your page, I became hooked to all your tips and believed instantly that I can also be an entrepreneur and I will work hard to attain that very purpose. Thanks for the motivation!

  64. John Heinz says:

    Very clever read! I will bookmark this page for further reference.

  65. Veronica Burnham says:

    Interesting and motivating! This definitely kept my focus on the goal.

  66. Rob Puckett says:

    I agree Veronica, GOAL-SETTING is really important in order to motivate you to work your way up and be able to inspire others as well.

  67. Francy Obias says:

    Thanks so much for your posts! Very educational and doable in any business type.

  68. Andrew Vick says:

    I am such a fab of your blog. I follow all your posts because this really helps me in my own online gigs and business. This is like a secret weapon for me..LOL

  69. Julie Schoomer says:

    You are definitely the guru of entrepreneurs. Keep it up!

  70. Janice Cullen says:

    Thanks! I learned a whole lot more about handling money and proper allocation of emergency funds and managing people as well.

  71. Adriel Rulloda says:

    People management is definitely the most important and challenging part of business strategies.

  72. Hailey Adams says:

    Remarkable and clever! Very useful for today’s modern entrepreneurs!

  73. Andrew Deboise says:

    This is something that can be applied to any business setting. VERY HELPFUL and INTUITIVE tips!

  74. Harry Lohan says:

    Thanks for sharing all these vital business information! I wll subscribe to your RSS feeds for further details and information.

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  77. Jackie David says:

    New entrepreneurs in any industry need to understand how to “stay in the game” until revenue begins flowing from customers. So many don’t understand the length of time needed to obtain those customers so they may not have enough emergency money set aside.

    1. Great insight- thanks for sharing Jackie!

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