Maintaining Cash Flow in Your Business

airplane moneyOwning a small business isn’t as simple as selling stuff and making a profit. In fact, the bigger your business (and it doesn’t have to be very big to get complicated), the more complex your issues of cash flow will be. If your business is any larger than you, you’ve got to pay employees, pay utilities, and buy all kinds of goods and materials. You also want to grow your business, to some level, within a certain period of time. Without a sufficient cash flow and financial cushion, you may have to wait on certain expansions. Luckily, by tightening up some inefficiencies and practicing good business finance behaviors, you can maximize your cash flow in no time.

Earn Interest on Your Cash. Your bank probably has interest-generating checking accounts that you can open. You should also avail yourself of higher interest savings accounts and CDs, or even money market accounts. Just keep your assets liquid if you need them to be. This is especially important with CDs. They are fine, as long as you aren’t penalized for removing your money. 

Sell Your Old Stuff. If you have old equipment or inventory that has been sitting around collecting dust, it’s time to clear house. Get what you can for your disused equipment and either invest the money in an account or financial product, or in an upgraded replacement to the equipment you sold. If your “vintage” inventory is just sitting around, it’s worth more to you selling for less than you’d like that simply taking up shelf space. Simply getting it out the door can be psychologically rejuvenating. Some people say sell whatever is sitting around for more than a year. 

Inventory Credit. Think of this like a home equity loan, if you are more familiar with that. Banks know how much it costs for you to buy raw materials, pay someone to produce your product, or to buy finished products that you now stock. Many institutions will be willing to give you a loan of up to 50% of the value of these goods, using them as collateral. Like a home equity loan, the rates are good, but it shouldn’t be the glue that holds your business finances together either. 

Get Deposits on Big Jobs. If you are ready to fill an especially big order, ask for a deposit of 50%. You have a lot of material costs to consider. Until you actually make the sale, and the money is sitting in your bank account, you are the one footing the bill for the construction of this product or the performance of this service. Deposits are expected in these situations, and you shouldn’t spread yourself thin by leaving money on the table. 

There are many other ways to make the most of the money in your business. Run credit checks, set specific deadlines, and track payments. Each of these methods makes you confident that things aren’t going to go wrong at the last minute. There are lots of other options in the infographic provided, but we hope that these simple methods have been some help in making your business cash flow positive.

Business Cash Flow Infographic

Consider small business loans from Citizens Bank