Controlling cash flow for business growth is one of the steps that can mean the difference between keeping your business open and operational or going out of business. Cash flow allows you to:
- Leverage cash for growth opportunities
- Lower the amount of debt you take on
- Pay debts and avoid harsh penalties
If you begin managing, monitoring and controlling your cash flow, you give your business the best chance of success.
Cash-flow Management: How to Keep Your Cool
If you run a cash flow forecast and see that your finances are going to be in the negative, it can impact your entire life. Owners have a lot riding on their company, and it can be difficult to keep your cool if you see profit margins shrinking and more money leaving the bank than is coming in.
Many owners will:
- Toss and turn at night
- Become consumed with cash flow management
If you don’t do anything to change the situation, you may face the real possibility of shuttering your operations or having to take out debt to keep your business operational. If you follow the tips below, you can keep track of your cash flow like a professional, find ways to lower expenses and boost working capital.
Controlling Cash Flow Weekly
How long is your cash flow statement period? Many businesses will create a statement for a quarter or year, but they’re missing out on the insights of a weekly cash flow report. When you narrow down your cash flow weekly, you can:
- See how your business is growing or shrinking week after week
- Keep tight control over your finances
- Have a micro view of changes you need to make to your business
Yes, you can also begin monitoring your cash flow for a month or quarter, but your weekly cash flow puts you in full control. If you’re increasing your cash flow every week, you can be confident in the direction of your business and make immediate changes in the “now” that you might overlook in a monthly forecast.
In a world where business changes so rapidly, it’s important to run a weekly cash flow forecast to monitor the trajectory of your business.
Taking Lessons from The Past
The past may be behind you, but there are a lot of lessons that it can teach you about the future. You should add historical data to your cash flow tracker so that you can have a better understanding of:
- Seasonal trends
- Biggest income drivers
- Largest expenses
You should look at your forecasts to pinpoint trends in your spending so that you can uncover recurring expenses that you may overlook or areas of the business where you can reign in spending.
Historical data will also allow you to create more precise forecasts, which account for seasonal trends.
If you simply look at data from the busiest seasons of the year, you’ll have a very skewed view of your operations and how they may perform in the future.
Look Ahead
Now that you’ve looked at your operation’s past, it’s time to look at the future. You can use this data to:
- Create annual budgets
- Learn when to secure loans
- Make smarter business decisions
- Negotiate deals with suppliers and vendors
- Much more
You can look ahead to learn when you may need to take out a business loan or when you’ll have enough cash to expand into new markets. The future of a business is one of the driving forces of innovation in the world.
It’s exciting to see a business grow or to take corrective action to avoid disaster.
Looking ahead will also drive your decision-making process. For example, if you learn that you’ll be flushed with cash, you can opt to hire new employees or spend more on advertising. These are decisions that you might not have made if it wasn’t for the forecast that you created.
Control The Here And Now
Once you have a clear view of your operating cash flow, you can then take control of the here and now. Up-to-date cash flow figures allow you to:
- Make rapid business decisions
- Control the course of your business
- Find ways to reduce expenses now
- Grow your business at a time that is most beneficial for you
- So much more
Effective cash flow monitoring will allow you to be certain about the future of your business, even if it’s bad. With that said, be cautious with long-term forecasts because multiple variables can change these forecasts if they’re a year, two or more ahead.
Weekly and monthly forecasts provide greater accuracy of your cash flow and can help guide your operations.
In Conclusion
Monitoring and controlling your cash flow is one of the most important administrative tasks that you can begin doing today to ensure the future of your business. However, if you want to make the process easier, consider using a SaaS solution or software to help you manage your cash flow by connecting to your accounts.
