Monday, May 23, 2011

Top 5 Ways to Control Money for a Small Business

Cash flow management is every entrepreneur’s nightmare. Even for the financially astute, it is one of the toughest challenges every small business owners faces. Most have gone through the school of hard knocks and experienced cash flow crunches.
A small business that fails to manage its cash flow well, places its long term success and continuance in grave, grave danger.
Below are five ways to control your cash:
1)      Create a monthly budget for your sales and expenses .It is a blueprint for your business and what you hope to achieve over a months time. Start by forecasting how much in sales you expect for in that month. For example if you are selling   a service, price out the fee you forecast and build your expected expenses around that figure.
2)      Once you have a budget begin tracking your cash flow. Make sure you know where your money stands at all times .Set aside time daily or weekly to update yourself on payments and collections. When you see more outflow than income immediately nip it in the bud.
3)      If what you sell is product oriented, maintain a low inventory. That is money wasting away just sitting on the shelf. Purchase products only when inventory is low.
4)      Collect your money. If you offer credit to your customers to pay at a later date, bill promptly and continue to follow up when the bill is not paid up. The governments and large corporations are notorious for not paying small businesses on time .Many have gone under waiting for money to come in .If you provide services or products to any of these entities, make sure you have two to three months money cushion to tap into when their payments are late. Ideally, try to have customers pay you upfront or a portion of the total price before they receive the service or product.
5)      Cut down on your over head. Look for savings in every area, especially office supplies, advertising, postage, electricity and phone bill. These are areas where expenses can easily get out of hand.

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