Cashflow is the lifeblood of your small business. It’s what sustains you in hard times and provides the financing for your future growth. But too many companies don’t pay enough attention to managing their cash, and it catches up with them: Suddenly they find themselves strapped for cash at the worst possible time.
Establish a positive attitude
The more positive you are, the better you will work. When your mind is on the tasks at hand, your decisions are more likely to be sound. You will avoid any potential pitfalls that might throw off your plan by having a positive outlook on life.
Create a realistic budget
One of the most important features of any budget is being realistic. When you create yours, estimate your income accurately and include all the necessary expenditures. Include your salary, loans, mortgage payments, car expenses, tuition payments, etc. You can’t expect to have a decent cashflow if you don’t plan accordingly.
Get control of your spending
The easiest way to save money every month is to stop wasting it. It sounds simple, but many people don’t do this enough. Reviewing your spending can help you find ways to save. Write down what you spend every day, where you spend money, and how much you spend in each category. You might find that your coffee addiction costs more than you think.
Cut back on your insurance premiums
If you have a lot of insurance policies, it might be time to consider cancelling or consolidating your coverage. In order to save money on your premiums, do some research and ask your insurance company about what kind of discounts they offer. You might find that you can shave tens of dollars off of your payments just by asking for a better deal.
Diversify your income stream
Cashflow is the measure of how much cash you have in your bank account, relative to the expenses that are due in any given time period. A healthy cashflow means you’re making more money than necessary to cover bills and other costs.
Invest in quality assets and keep them for the long haul
A strong cashflow is necessary for any business that wants to grow and take on extra risks. That’s why a good investment portfolio is right at the top of the list of things to do. In order to make your finances more predictable, you should invest in assets that can generate cash flow over time, such as real estate and interest-bearing securities.
You can also get better returns by investing in stocks or other types of investments. A lot of people think that stocks can only generate profits in the long term, but that isn’t entirely true. Even if you invest in stocks with the intention of holding them for a few days, months, or years, you can still get a more predictable cash flow while you wait to make your money back.
Shop smarter and save more
Shopping can be a form of entertainment for some people. It’s really easy to find yourself spending money on frivolous things like coffee and snacks that you could easily make at home. Make a list of all the things you need to buy, and then try to stick with it as much as possible. Don’t spend more than you need to, because the only reason to go shopping is when you’re running out of something.
There are plenty of ways that saving money on your purchases can help your business out in the long run. For example, if your budget allows it, buy everything that you need in bulk. Not only will you save on the price per item, but you can also use any excess to make extra sales in the future.
Diversify your investment portfolio
The best thing you can do to stabilize your cash flow is to diversify your assets. Aside from real estate and interest-bearing securities, you should invest in different kinds of stocks, too.
Buy stocks that pay dividends
A lot of people don’t like to buy stocks because they just want to sell them as soon as they get a profit. It’s a good idea to pay attention only to companies that can offer consistent returns over time. Look for a stock that pays dividends. The dividends will help you offset your costs and give you a small profit at the end of the month.
Stay away from complicated stocks
If you’re just starting out, try to avoid investing in complicated stocks like derivatives and options. It’s true that more complex assets might have higher potential profits, but they also have higher risks. Even if you succeed in your investment, it could take a long time for you to get your money back.
Practice delayed gratification
You don’t need to increase your revenue or decrease your costs as soon as possible. You should be patient and wait until you have enough cashflow to make the right decisions. There aren’t many things that can change the course of your business like a cash problem, but it’s impossible to solve those problems when you don’t have enough money.
Take the long-term view
If you’re running a business, chances are that you want to take it as far as possible. It’s easy to let yourself get distracted by short-term goals like reducing your expenses or increasing sales, but those tactics won’t do much for your company in the long run. If you focus on the long-term goals, your business will be better off in the end.
This mindset also applies when you’re getting corporate credit. You need to be able to calculate the long-term benefits of such loan without putting too much focus on the immediate interest payments. For example, if you take out a loan to finance your new tractor that can improve productivity, which allows you to take on bigger contracts are worthwhile.
Save money on licensing
When you’re starting a new business, one of the things to do is to research and take out all the necessary licenses that your business needs, such as licenses for use of trademarks, patents, and so forth. It’s easy to find yourself spending a lot of money on licensing because there are many small fees involved.
If you can cut back on these fees, it’ll give you more cashflow for other aspects of your business. You should also consider using other ways to reduce costs like crowdsourcing or working with an independent contractor if possible.
Reduce your operating costs in all areas
Whatever you’re spending money on, you should be aware of where your business is spending its money. Every dollar spent counts, so don’t worry about every little detail, just make sure that you’re making the best use of each dollar.
Kitchen and dining facilities are common places where businesses spend a lot. You should always be sure to look for ways to reduce the cost of these expenses. Try looking for cheaper food options, or working with local suppliers if you can.
Improve your productivity and efficiency
A lot of business owners think they’re already doing their best to improve the productive capacity of their business. However, you can always do more to increase your productivity levels and efficiency. You should consider hiring a financial advisor to help you make better use of your office space, hire more employees if you need them, and so forth.
The key to improving your cashflow is to always be aware of when you are spending money and what you are spending it on. You should also try to find ways to reduce the cost of your expenses in general. The only problem is that there aren’t many ways that you can change the course of your business like a cash flow issue and some unexpected event can put a fast-pursuing company in a bind.
Note: This is a collaborative post