Cash is probably the number one cause of stress, worry, and anxiety for smaller business owners, which is natural when cash dictates the success or failure of any smaller business. Studies by the ANZ bank shows that up to 82% of small businesses fail because of cashflow problems. Some smaller business owners focus on budgets, which is essential, but it is only half the picture the other half is a clear projection of your cash flow. Managing your cash flow gives you a useful estimate of where your business will stand from a liquidity point of view into the future.
The ability to analyze your profit and loss statement, identify trends, and interpret what these tell you about your business is important. And you need to put that information into a useable form with a good cash flow forecast.
We teach some of these critical financial tactics in our Forecasting Your Business Webinar. And it comes with a free forecasting template that you can use for your business!
Relieve your mind from the anxieties of the unknown, fly by the seat of your pants style business management and join us here.
Why is it important to manage your cashflow efficiently?
It helps you prepare. The goal of cash flow management is to foresee upcoming financial difficulties. Identifying when finances are going to be tight will allow you to plan where and how to allocate your
funds. Managing your cashflow involves analyzing your business indicators, estimating the timeline for sales booking, understanding your budget, diligently collecting your receivables, and regularly updating your forecast.
It reduces your anxiety. Financial issues can cause stress, but it doesn’t mean that we can’t take control of this. It is easier for us to come up with the right action if we know when financial issues are coming. Relieve yourself from the anxieties of the unknown and sleep Source:Source:easy knowing you have the cash to pay your bills!
Creditors are likely to trust you more. When asking for business loans and cash flow assistance, the lenders always look into the health of the company’s cash flow. There is a higher chance of having a loan granted when you can show you are on top of your budgets and cash flow. Of course, ideally, you should apply for a credit line when your cash flow is still positive, but this is not always necessary especially in these extraordinary times. And with government-backed loans, you have greater flexibility in these areas, but it is still a good idea to secure loans and credit lines before you need them.
It offers you room to grow your business. Ultimately, every smaller business owner wants to scale their business, which requires allocating resources for its growth. With cash flow management, you get a precise idea of how much profit is in hand and how much of this you can allocate for business development and growth.
The bottom line is that every small business owner should have a clear idea of where they stand and where they are going financially. This way, they can foresee when finances are going to be tight and plan the business accordingly.
No news is bad news if you get it in time to do something about it!