Most new entrepreneurs struggle with proper management of business finances and unexpected expenses. According to the latest small business cash flow report, more than 61% of small businesses find handling steady and consistent cash flow daunting. Similarly, about 32% cannot afford to pay themselves, employees, or vendors because of cash flow issues. This post discusses some effective tips to help you manage your small business cash flow to stay profitable.

Make Business Financial Planning a Priority

Your business finance plan should include accounting, budgeting, tax planning, future prediction, and risk management. Regularly go through your business’s financial statements and accounting reports to draw insights into how your business is performing.

With this, you will be able to establish the right financial goals, such as knowing whether to inject more money into the business for expansion or invest for retirement. Prior financial planning will also enable you to prepare your business taxes in advance, avoiding common mistakes and lowering your tax burden.

Seek Additional Financing Options

Volatility and disruptions in the market can significantly hinder your business from achieving its working capital requirements, regardless of how skillful you are at managing small business cash flow.

Fortunately, you can seek additional financing options, such as express loans, to cover unexpected business expenses. The good thing with such loans is that you can apply and receive the money in minutes from the comfort of your home or business.

Separate Business and Personal Finances  

Mixing business and personal expenses and finances can lead to accounting issues and disorganized records. It makes it challenging to track incoming money and outgoing cash. This can cause overspending, as you may use business money to clear personal expenses. It may also hamper your efforts to claim tax deductions for business-related expenses.

Develop an Emergency Fund

It is often impossible to foretell all the costs and expenses your business may incur. Sudden equipment breakdown or staff shortage can exert pressure on your working capital, generating a cash flow gap.

Maintaining an emergency fund will help you meet unforeseen expenditures, limiting borrowing or running into a cash crisis. The ideal amount to deposit in your emergency fund depends on your business’s risk factors, size, and unique needs.

Improve Inventory Analysis

One of the fundamental building blocks of a business’s longevity is proper inventory management. Well-organized inventory helps keep your entire supply chain on track. Additionally, it enables you to avoid issues with overstocks, mis-shipments, out-of-stocks, and financial inefficiencies, among others. Some strategies for better inventory analysis and management include:

• Automating inventory management systems
• Leveraging demand planning tools for accurate forecasting
• Integrating mobile technology to receive real-time inventory updates
• Encouraging suppliers and customers to shift from paper to digital payments
• Reducing your liquidity risk

Review and Adjust Your Budget

While it is advisable to stick to a realistic budget, you might need to review the existing budget and adjust where necessary when dealing with unexpected costs. This may include moving funds from less critical areas to more demanding ones, finding more revenue streams to increase your budget, or postponing non-essential expenditures. At the same time, you may need to keep an eye on your cash flow budget to track incoming and outgoing money. This will help you to stay up-to-date with your business’s liquidity position.

You can easily manage your small business cash flow with the right tips and strategies to keep it operational and profitable. Always work on reducing costs and look for additional funding options to deal with unexpected expenses. Besides, constantly monitor your cash flow to identify issues in good time.