Five tips to man­age your cash flow

Too many en­trepreneurs ig­nore th­ese all-im­por­tant steps to stay­ing ahead of the fi­nanc­ing curve

Ottawa Business Journal - - SMALL BUSINESS WEEK - – Spe­cial to OBJ

Cash is king – it’s a common say­ing in the business world. But sur­pris­ingly few en­trepreneurs take steps to man­age their cash flow so they don’t wind up with an empty bank ac­count and noth­ing to pay the bills.

“One of the main causes of business fail­ure is poor cash flow man­age­ment,” says Susan Ro­hac, se­nior vice-pres­i­dent, fi­nanc­ing and con­sult­ing, at the Business De­vel­op­ment Bank of Canada.

The good news: cash flow man­age­ment is easy to im­prove with a few sim­ple steps.

“Get­ting con­trol over your cash flow helps you pre­pare for slow pe­ri­ods, plan your fi­nanc­ing and have peace of mind,” Ms. Ro­hac says.

Follow th­ese five steps to get a bet­ter han­dle on your cash flow. prices to bet­ter re­flect costs. Bonté also un­loaded lower-mar­gin prod­uct lines and launched an ef­fi­ciency drive while tight­en­ing cash flow man­age­ment.

The changes had a huge im­pact. Sales in Bonté’s meat di­vi­sion are up 36 per cent since 2009, while gross profit is up almost six per cent. “We learned to watch our cash very care­fully,” Mr. Whit­taker says. “You need to al­ways be ahead of the curve on cash flow man­age­ment.” Next, pre­pare a cash flow pro­jec­tion for the com­ing year. This is your early warn­ing sys­tem for cash flow hic­cups. Use an Ex­cel spread­sheet or ac­count­ing soft­ware to plug in ex­pected monthly cash in­flows and out­flows, in­clud­ing an­tic­i­pated big-ticket pur­chases.

Use the pro­jec­tion to an­tic­i­pate slow pe­ri­ods and plan in ad­vance what to do about them. “Through the year, check your ac­tual cash po­si­tion reg­u­larly – once a week or month – against your pro­jec­tion to see how you’re do­ing and deal promptly with any di­ver­gences,” ad­vises Ms. Ro­hac. Get­ting money into your business more quickly can save you car­ry­ing costs on your line of credit. Some tips: send out in­voices more quickly, ask cus­tomers to pay elec­tron­i­cally and charge in­ter­est to slow-pay­ers. Fac­ing an un­ex­pected cash flow crunch? You can raise cash quickly us­ing var­i­ous tech­niques: ap­proach your bank for help; check your inventory and as­sets to see what you can sell off, even at a dis­count; ask sup­pli­ers or your land­lord for ex­tra time to pay bills; or of­fer your cus­tomers a big dis­count to earn some quick sales.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.