By Bruce Morse
Regional Director of the Wyoming Small Business Development Center Network 

I made money, where did it go?

 


Cash flow issues seem to be a concern for many small businesses. They often stem from a limited understanding of the components of cash flow itself. The basic definition of cash flow is “the flow of money into and out of the business.” This includes income generated from sales activity and expenses from all of your operating costs.

Hopefully your accountant told you after tax season, “Congratulations, you made a profit last year.” Even so, you might look at your checkbook balance and see that it is nearly empty. I am sure you are asking yourself, “How can both be true?” First of all, there are some differences between cash flow and profit. For instance, a business may have money tied up in accounts receivable that shows up in revenue but not cash as they have yet to collect it.

Whatever your situation might be, here’s a list of possible actions you can take:

*Speed up billing.

*Beef up your collection process and consider changing your credit policy

*Negotiate longer terms with suppliers/vendors

*Be careful with taking discounts if you don’t have the cash

*Watch your inventory levels carefully, and move out stale or excess items

*Anticipate cash needs (budget) and establish a line of credit to cover shortfalls

* Take credit cards in lieu of billing a customer on account

If you need help with analyzing your situation and developing a strategy for your business, the Wyoming Small Business Development Center Network can help with our Financial Health Check-up. This no-cost, confidential resource will analyze your financial information and then we can have a dialogue about possible ways to improve in 2018.


 

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