Cash flow management is one of the top priorities of business owners. It is also why a lot of businesses fail to sustain their growth and make it through the first few years. But it doesn't have to be a painful topic.
Using the data you generate in your daily operations as a business owner can greatly increase your chances of managing a positive cash flow and keeping it healthy. Your data has great power, and you can manage it easily by keeping a few things in check.
Planning & Preparation
Identifying sales patterns, potential shortages, and projects or ventures that require bigger streams of investment/allocation of resources ahead of time is key. If you don't know what's ahead, you can't properly manage what you currently have. Planning ahead can actually be quite simple, all you need is a simple excel spreadsheet detailing how much is excepted to go in and how much is expected to go out, what is under your control and what isn't, and when is it all going to happen.
Cost Cutting
Many financial experts have already said it before: It's not how much you make, it's how much you save. You can't directly control how much you're going to sell every month, but you can control your expenses. In order to cut unnecessary operational expenses, you first need to start keeping track of what they are, how frequently they occur and if they are ultimately contributing to your effort of generating profit or hurting it. Analyzing your expense data to cut costs will have an important positive impact on your cash flow.
Understanding the Time Value of Money
Time equals money therefore as a business owner your time is everything. It is what everyone is fighting for: your clients, your potential clients, advertisers who try to sell you their products, your employees, and pretty much everyone else. As a business owner - especially if it's a small business where you choose to manage everything by yourself -keeping track of where your time goes is crucial. If most of your time is not contributing to your goal of making more money, then something needs to change. But again, in order to realize what it is, you have to keep track of it.
Writing down a daily summary of how you chose to allocate your time will be extremely beneficial for the future success of your business. And the next step would be not only realizing how you're spending your time, but actually doing something about it: cutting on the time you're spending doing unnecessary or repetitive actions that don't contribute to the success of your business and making an active decision to focus more on actions that have a positive impact on it.
Remember, cash flow isn't intuitive, you have to keep an organized and analytical record of the time you invest and of every single dollar that goes in and goes out in order to manage it effectively and grow your business.
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