Cash is king.

Especially when it comes to the successful financial management of your small business, managing cash and its flow is essential.

The Basics of Staying in Business

According to study conducted by the U.S. Bank, 82% of businesses fail to stay in business because of cash flow problems. (https://www.entrepreneur.com/article/187366)

Cash flow is simply the money that comes in and the money that goes out. It is as simple as that, but cash flow can get quite tricky quite quickly in the real world.

When combined with ordering costs, shipping costs, delayed payments to you from vendors, and payroll every two weeks, running out of cash isn’t too tough to do.

Keep in mind here that cash is not the same thing as profits. You don’t pay bills with profits. You pay for bills with cash.

If you run one of those small businesses where every customer pays you immediately and you don’t buy anything else before you sell what you have...you’re golden.

If this scenario is you, you’re an exception to the rule. And we couldn’t be happier for you. Really.

As for the rest of you, (and we know there are a lot of you out there!), here are strategies for your success.

Righting the Negative Numbers

Positive cash flow is when your small business is receiving more cash than cash that is going out. Sales are flowing in. Your accounts receivables are solid. This is a good place to be.

Negative cash flow is the opposite. The cash going out is greater than the cash that is coming in. If your stomach goes cold just imagining this scenario, know that negative cash flow doesn’t always mean trouble. You won’t be “going out of business.” Not yet. Hold your horses.

But, if your small business is regularly and continuously hanging out in the negative cash flow arena, you’ll want to giddy up.

Strategic Solutions for Negative Cash Flow Businesses

Consider ideas to cut costs and boost your positive cash flow power by:

Reviewing every expense, no matter how small
Tracking what you spend and ask, “Do you really need each of these?”
Tracking these metrics and project them one year ahead:
- Collection days: how long you wait to get paid
- Inventory turnover: how long your inventory sits
- Payment days: how long you wait to pay your vendors
Increasing low-cost advertising alternatives
Decreasing traditional and more expensive advertising options
Shouldering the burden with a neighboring business and go in on ads together
Try bartering (i.e. if you’re a tax accountant and are looking for an office re-design, could you barter your services with a decorating firm for an even exchange? P.S. It never hurts to ask.)
Going green. Save energy. Save money.
Saving on travel expenses by hosting virtual meetings instead
Employ interns

Economic uncertainty is stressful in the world of small business. Building a stockpile of cash offers increased opportunities and business flexibility for continued growth over time. Plus, you’re certain to sleep more soundly at night.