Knowing what your cash flow is at any given time is important for all businesses, but especially for entrepreneurs who may not have the luxury of deep pockets. This is especially true during periods of business growth. Why? Because your expenses go out before your income has time to catch up. You’ve got to manage your cash flow before you grow. That way, you are always ready and one step ahead. First, do a between-period bank reconciliation to know what has and hasn’t cleared before you pay your bills. The trick when you are figuring out your cash flow, though, is not to use your bank balance. Instead, use your QuickBooks balance so you can get a truer sense of actual cash-on-hand. Unlike your bank balance, your QuickBooks balance will account for checks that haven’t cleared.
Next, look ahead to any big payments coming up in the two upcoming weeks. Do you have payroll? Sales tax? Don’t forget to account for these big expenses.
Look, cash is king. Don’t spend it buying inventory in bulk just to get the discount. Part of maintaining a healthy cash flow is conserving it—especially when you know you might soon be financially squeezed. If you know that you are going to fall behind on your payments, head that drama off at the pass. ‘Fess up. Call your vendors and explain what is going on. You’d be surprised to know that terms can often be worked out. Vendors appreciate honest, upfront communication.
Sometimes the growth is just too much. You can’t keep up. If desperate measures are required, you can always look into receivables or merchant loans. It’s true that these can often have shocking interest rates and payback terms, but there are some decent companies out there. Do your research. If it comes to this, get advice from an accounting professional before signing for a loan. Did you catch that? — before signing for a loan.
Growth is good, but it doesn’t mean it’s easy. Getting to know your cash flow now will save you in the long run. You’ll have a firm grasp on what is and what is not possible. Even better, you’ll have a plan that positions you for success.