5 Steps to Plan Your Cash FLow
Cash flow is one of the key indicators of how many small businesses are doing. It can also be a massive stress for business owners. So how do you plan your cash flow to help alleviate stress and get your business where you want it to be? Here are five steps for planning cash flow. Before you start, remember you can have lots of cash flow forecasts!
1 – Create a budget
The first step in planning cash flow is planning the revenue and expenses of your business to know how much money you think will be created and spent during normal operations.
2 – Find other sources of cash flow
Look at all money going out or coming in that is not on your budget. Some examples are grant income, loan payments, and owner investment or distribution.
3 – Figure out what you want to pay yourself
Many small business owners pay themselves when they think they have enough money in the bank. This can get you in trouble in slower months when cash flow is tighter, and it can hurt your business. Look at your budget, what you have paid yourself in the past, and what you project your annual net income will be. You’ll need to look at all of these numbers to figure out what you can afford to pay yourself. Increasing how much you pay yourself may be your goal, but don’t do it until you have the revenue and cash flow to justify it!
4 – Decide if you have big purchases to make
Are you looking at purchasing new equipment, renting a new space, or hiring more help? If you haven’t added these to your cash flow yet, do so now.
5 – Look for loans/investors/etc
If your cash flow has been negative and looks like it may continue that way for a little while, look for investors or loans. This will involve more planning than the other steps because you need to really look into how much money you need. Basically, you need to figure out what amount would help get your revenue to a level in which your business can support itself. The money may need to cover the cost of new equipment that will help your business or help with costs that will help get you to your goals.