Wise Cash Flow Management for Solopreneurs
by Pat Matson
One of the most challenging aspects for a small business to handle is the management of their cash flow, or sometimes the lack of it. Let's take a look at the many aspects of wise cash flow management.
You all know the money out is called Accounts Payable, and the money coming in is called Accounts Receivable, right? Your Accounts Receivable get generated from the sale of your products, the fulfillment of service contracts, or maybe the in flowing of money comes from one sort of loan or another. And your outflow, Accounts Payable, goes out to pay for inventory, expenses, payroll, overhead, or paying back loans. You've got to keep your finger on the pulse of accounting for the monthly operation costs, the level of cash flow incoming, and the size of your expenditures.
You must be intimately familiar with every aspect of your cash flow management. For example, your accounts receivables should be governed to see when any invoice is past it terms. This can drastically affect cash flow out if it isn't coming in. Wisely look at the credit terms set up for the payments on inventory. Longer terms mean less cash flow initially. How much credit do you extend? Know how much is too much to put you into cash flow purgatory.
If you don't know how to do a cash flow analysis, the Internet is a huge help. Here are some links that will show you just what to do: http://www.toolkit.cch.com/text/P06_4300.asp http://www.inc.com/articles/2000/08/15590.html
Once you have a cash flow budget, you can take steps to make the income flow faster, the outflow move out more slowly, and streamline the billing process to accelerate the income. EZ Invoice Inc offers a simple, effective, easy-to-use Billing Only software that will allow you to create invoices from anywhere in the world right from your website. They have nearly instantaneous customer service too, a blessing in this day and age.
Sometimes, there is a gap in time between the Payables going out and the Receivables coming in. Your banker can help with this temporary shortage. Again, your Budget will help you spot these times.
We wish each of you who reads this "May this happen to you, and soon." You can use this surplus for investing or for decreasing your debt. Again, your banker can advise you what's best for your business.
Your home-based business might not have needed a degree or specialized training to get off the ground, but learning the ins and outs of business accounting and financing helps grow that business into success. Investing in a software program like EZ Invoice Inc. is one surefire way to keep that cash flow coming on in!