Rolesville Small Business Cash Flow Management

Understanding Your Cash Flow Management

Before you make any major changes in your Rolesville business, like expanding or hiring more people, you need to understand your cash flow first. Everything you do involves money either entering or leaving your business, so knowing exactly how money comes and goes gives you the opportunity to make informed decisions for how you run your business. 

Small Business Cash Flow Monitoring in Rolesville

Small business accountant for cash flow managementIf you need help with generating a cash flow report or understanding what it means, we can help. Our  team of small business CPAs can provide cash flow management analysis and report generation as just one of the many financial services we offer small businesses. At C.E. Thorn, CPA, PLLC, we can walk you through how money is moving into or out of your business accounts. This will give you the clarity and confidence you need to make future plans for your business and prepare for potential downturns. 

Profit Vs Cash Flow – Is There a Difference?

Profit and cash flow are not the same thing. Cash flow looks at how money flows in and out of your business – you sell products, you buy supplies and inventory, etc. Your profit is extra that’s left after you’ve paid bills, payroll, and taxes. 

Understanding and tracking your cash flow lets you look at trends and have answers to questions like:

  • What is my busiest time of year? Are there times during the year when more money is going out than coming in?
  • Where is my business’s money coming from or going to?
  • Why is there more/less in income/expenditures?

Having and using this information puts you in a better place to be approved for a business loan or line of credit. More importantly, you’ll see most potential cash flow problems coming and plan accordingly. 

Managing Cash Flow for Long-Term Success

Pretty much all businesses have highs and lows in their income versus outgoing expenses. Some months are busier, some are less busy. Tracking your cash flow lets you know when these highs and lows are so you can take action, such as hiring temporary help during busy months (like December, if you’re a retail establishment), and reduce expenditures during slow times, like cutting your operating hours to reduce payroll and utilities. 

By providing cash flow management analysis, we’ll help you look at what is causing gaps in your cash flow and what you can do to close them. 

Gaps in Yearly Cash Flow

  • Intentional gaps occur when you are doing something that will directly lead to a drop in cash flow. This could be a large equipment purchase, expanding your business, or hiring more people. 
  • Unavoidable gaps are drops in income you see coming in advance, like seasonal trends that can  increase or decrease your cash flow,  such as the holidays, tourism/people leaving for the summer, or even yearly sporting events.
  • Unforseen gaps are events that happen with little to no preparation. This can be major, like a natural disaster or smaller, like a vendor raising prices slightly. Even poor cash management can lead to a gap in your income.

Improve Cash Flow at Your Rolesville Small Business

Understanding your cash flow doesn’t need to be a source of stress, and once you see problems or issues that could become problems, you can take action to fix them. Look at these four areas for ways you can reduce possible risk:

  • Accounts Receivable – These are payments your clients owe your business. Late payments affect your incoming money, and you may need stricter penalties to reduce late payments.
  • Accounts Payable – These are the bills and invoices you owe to your vendors, utility company, and suppliers. Taking a closer look may show you where you can trim outgoing expenses.
  • Credit Terms – The amount of time you give clients to pay for services can decrease your cash flow, especially when payments are late.
  • Excess Inventory – By having too much inventory on hand, you’re tying up your cash instead of putting it to use or saving it during a downturn in income. Only order enough to keep up with demand. 

8 Tips for Controlling Your Cash Flow

  1. Know the amount of cash you have available at all times.
  2. Understand your financial history and data so you can forecast income and expenditures.
  3. Know the amount of cash you need to break even.
  4. Don’t include your profits when planning out your cash flow management.
  5. Keep an emergency fund or extra cash free so your business stays solvent during downturns or slow times. 
  6. Change your credit terms to reduce negative cash flow if you have too many outstanding payments or customers who pay late. 
  7. Know the minimum threshold you need to stay operational and keep track of that threshold regularly.
  8. Analyze and track your cash every month so you know if you have enough incoming money to meet how much needs to be outgoing.

Contact Us for Experienced Cash Flow Management Support in Rolesville

At C.E. Thorn, CPA, PLLC, our accountants can work with you to create a realistic budget and cash flow strategy for your business. To speak with a leading small business accountant, call us today at 919-420-0092 or complete the online contact form today.

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