Starting a business is fraught with potential pitfalls, but one of the biggest problems many new businesses owners face is cash flow. When you’re first starting out, every penny counts, whether you’ve taken out loans, you’ve partnered with investors, or both. You need to spend smart, negotiate carefully, and track every cent to make sure you have the cash flow to meet your obligations and keep your doors open.
The good news is, you’re not reinventing the wheel, and there are plenty of reliable services like Cape Coral Accounting Service, Inc. that can help you to stay on track and improve your cash flow until you get a good idea of how your income and expenses will ebb and flow. Here are just a few tips to help entrepreneurs enjoy a successful launch and manage their cash flow wisely.
Avoid Unnecessary Financial Risk
It’s tempting to stock up on materials that will last you for months or hire a full staff of experts with your investment dollars, but if you want to make it as a new business, you need to keep some cash set aside to weather the ups and downs of the early days of operations. Starting slow and carefully metering spending as you go gives you the best opportunity to track your business, set benchmarks, and grow over time.
Even if you have some promising accounts or marketing buzz going into your launch, you can’t count on novelty to see you through the pitfalls of your first year. Retaining cash and spending only as you need to can ensure you have cash on hand during lean months. Try tracking inventory and buying materials as needed, as well as outsourcing for certain services piecemeal instead of hiring full-time employees you don’t need and can’t support.
Submit Payments by Their Due Dates
As responsible adults, our first impulse is to pay bills when we receive them. However, when you’re working with limited cash flow, as many business startups are, it’s best to hold onto cash until you absolutely have to spend it, especially where bills are concerned.
Naturally, you don’t want to get into a situation where you’re paying late, racking up penalties, and upsetting vendors and creditors. However, you can wait until the due date to pay in order to keep as much cash on hand as possible, just in case you need it between billing cycles.
Don’t Be Too Generous with Receivable Terms
It’s not unusual for established businesses to offer receivable terms of net 60 or even net 90. This will not work for small businesses that rely on speedy payment to keep their doors open. Some industries, like medical and legal services, do not offer a lot of wiggle room, but most industries expect some amount of negotiation.
Try to start with receivable terms of no more than net 30, and ideally, net 15 in order to ensure steady cash flow early on. In some cases, you may even be able to negotiate for upfront payment for goods or services, especially if you consistently deliver on time and as promised.
Use Professional Bookkeeping Services
Tracking your finances from month to month, and even day to day, is essential to understanding how cash flows through your business. You need to know how much you’re spending on everything from payroll, to supplies, to production, to marketing, to monthly bills like a lease and utilities. If you’re buying lunch for employees once a week, you need to track the cost.
This helps you to understand where you’re at with your finances at any given time, not to mention how soon you could run out of money if you don’t receive any income (or even if you do have a fairly steady influx of cash). Of course, with all you’ve got on your plate as a small business owner, the tasks involved with tracking finances can overwhelm you. A reliable bookkeeping service like Cape Coral Accounting Service, Inc. can offer assistance with monthly, quarterly, and annual accounting services, keeping you on track and ensuring that you always know where you stand financially.
Get Help with Tax Considerations
Many businesses make mistakes when it comes to the IRS, whether they’re leaving qualifying deductions on the table or getting penalized for missing filing deadlines. A professional accounting service like Cape Coral Accounting Service, Inc. will properly deduct payroll taxes, submit filings on time, and track earnings, expenses, qualifying write-offs, and more to eliminate unnecessary penalties and missed savings, but also help you to regulate cash flow for your business.