Do you ever feel like holding onto cash in your business is like trying to hold sand in your hands? If so, you are far from alone. Cash is a big concern for many people. The good news is there are steps you can take right now to take control of your cash.
Focus on what you can control
When it comes to cash coming in and going out of your business, there is only so much that is within your control. It is important to identify what can be changed and what cannot. To take control of your cash you will want to focus your attention on what is within your control and where changes can be made.
With regard to money coming in, you can try to find new revenue opportunities or collect on what is owed to you. However, you may find that there is only so much you can do to have more money to come in, especially during difficult economic times.
Where you have the most control is going to be with the money leaving the business. Likely you have commitments of money going out that you cannot change. Some of these might be loan payments, rent, insurance premiums, utilities, and the like. But there are other areas where changes can be made that can greatly affect your cash position.
Review your operating expenses
A good place to begin is by looking at reducing your operating expenses. These changes may seem like they are small but they can add up to a lot of cash when you are looking at months or a year ahead.
Some areas to consider making cuts include:
- Software subscriptions not in use
- Nonessential travel
- Advertising expenses that are not producing results
- Subcontractors whose work can be transferred to employees
As an example, let’s say you identify three monthly subscriptions that are no longer necessary. Each subscription costs $19.99 per month. If you cancel those subscriptions, over twelve months you would save more than $700. Another possibility is you may be paying around $300 per month to advertise online, but you notice that is not resulting in quality leads. By cutting this one expense you can save $3,600 for the year.
The point is you should not dismiss these small changes. Over time, making these adjustments can result in a significant boost to your bank account.
Hidden areas impacting cash
If you are only looking at what affects your Income Statement or Profit & Loss, you are likely missing some key areas where you can take control of your cash. It is important to look at everything affecting your cash even if these do not affect your net profit.
Here is sample list of cash going out that would not appear on your Income Statement:
- Distributions (if an S-Corp)
- Purchases of assets
- Credit card payments
- Other debts
Be willing to make tough choices
Some cash improving measures may be difficult, especially when it comes to making decisions about cutting your pay or that of your employees. However, making the tough calls is essential to taking control. Without taking action, any cash problems you are experiencing are likely only to worsen. The pain in the short term can help prevent long term ruin.
How do you know if it is time to take control of your cash? Here are some telltale signs:
- You struggle to pay your credit card balance every month
- Your bank balance is gradually declining
- You stress about making your tax payments
- You struggle to pay your payroll taxes
You don’t need to be overwhelmed; we can help. Our cash flow projection service helps you determine how much money you are going to have at any given time in the future. It can help you to make decisions based on facts. To find out more, contact us to get started.