The benefit of increased liquidity for your small business

It’s a competitive business world out there, and one wrong financial move could set your business back substantially if you’re not careful. Particularly, you need to master the art and science of meticulous cash flow management if you are to maintain a steady upward trajectory, reach your long-term goals, and expand your brand to more lucrative markets.

Of course, this is often easier said than done for a small business owner dealing with numerous daily expenses and operating costs. Not to mention the constant need to innovate and improve your processes while reallocating funds to financially-taxing projects such as marketing in order to stay ahead of the game. That said, there are certain cash flow management rules that will, if you adhere to them, allow you to maintain cash flow while growing your company at the same time. Here’s what you need to do.

Know your exact cash flow needs

Every success story in the business world starts with a strategy based on research and intelligent data-gathering. In the case of cash flow management, your long-term success will be determined by your ability to note down your exact cash flow needs, both in the short and long term. This also means planning your cash flow according to where you want to be in five or ten years’ time.

After all, if you don’t scale your cash flow needs along with your goals, you’ll invariably end up where you started. Firstly, assess your current cash flow requirements by noting down all account payables, including overhead and payroll expenses. This is your bare minimum with which you can keep the doors open on a daily basis.

Next, figure out how much you need in order to create and effectuate a marketing strategy. Remember that marketing is the driving force of the business world, and should therefore rank high on your priorities list. And finally, consider the amount of cash you need flowing through your company in order to bring new staff in, expand your office space, and fuel the innovation process. This is the number you should always strive to achieve.

Don’t put your livelihood forward

One of the most important rules business owners should always keep in mind, especially those eager to push the company forward, is to always keep your own money out of it. Your personal assets have nothing to do with your company’s financial status, and while you could cut your own paycheck in order to reallocate funds towards your cash flow needs, you should never put your entire livelihood on the line. This is a rule business leaders in New Zealand always adhere to, so take note.

New Zealand might be a thriving economy, but entrepreneurs understand there will always be a time when they will simply have to invest in their own company to stay afloat. This is why personal cash loans in NZ have become popular in recent years, as they allow small business owners to safeguard their livelihood while preserving cash flow in their companies. In other words, always have a similar contingency in place, especially if you find yourself in need to finance a cumbersome project that will help your company reach its goals faster. When this happens, make sure you are covered as well.

Tend to careful forecasting

If you tend to meticulous forecasting, though, you might be able to prepare for every scenario and roll through the dry months of the year with no dips in cash flow. Your main concern should be to break even at the end of each month, and to achieve this, you will need to create accurate projections for every quarter, and prepare accordingly.

Doing this will allow you to obtain deep industry insights that will discover new possibilities for your company, and put you on the offensive. Too many business leaders think about how much they can save in order to break even during those difficult months of the year, when in reality you should think of ways to boost cash flow and make the most of a negative industry trend.

You might need to double down on your lead generation efforts, or you might need to focus on retargeting, but there is always a way to discover a lucrative opportunity if you look for it. With that in mind, be sure to tend to careful forecasting and create actionable reports to boot.

Save up for those rainy days

Your focus should be on careful and strategic saving on a monthly basis. At the end of each month, you are to allocate a certain percentage of your cash flow towards your emergency fund, per the amount approved by your accountant. To make this a reality, though, you will need to get paid on your invoices.

Master the invoicing process

When it comes to invoicing, there can be no compromise. This is your company’s future we’re talking about, so there is a need to master the invoicing process and maximize invoicing effectiveness in order to ensure steady cash flow. Rest assured, you will have to deal with late payers and non-responding clients.

To deal with this problem ahead of time, you can invoice your clients promptly and remind them of their responsibilities with a follow-up call or email. Offer incentives for early payers such as small discounts and be sure to offer numerous payment methods to allow them to pay in a way that benefits them most.

Final thoughts

Cash flow management is the most important task every business leader should tend to on a daily basis. This is not something that can wait around, so make sure to follow these rules in order to improve cash flow and future-proof your business for years to come.