Steps for better cash flow for your small business

Cash flow management is the lifeblood of any small business. Small business owners and their managers must be proficient in cash flow management or they could find there business failing before it is really even begun.

Here are some steps for better cash flow management for your small business-

• Always know how much you have-Financial experts agree that the foundation of good cash flow management is knowing precisely how much cash you have on hand today. This means that you must keep your business accounting separate from your personal finances and keep your books up to date. You should always be calculating your burn rate or negative cash flow. It is important to remember that your total cash reserves divided by the burn rate equals the number of months you can continue in business if no new revenue comes in.
  
• Always understand tomorrow's numbers-Every small business owner quickly learns that financial projections are a must for any business, not only because they establish revenue goals for the future but also because they help build a cash flow analysis. You should always be asking and preparing for what-if scenarios. Knowing the answer in advance to these types of questions will make you more ready to respond should these scenarios occur.
  
• Work to maintain just enough inventory-Financial experts advise that if you sell or resell products you should not keep more then a week's worth of safety stock unless you are very confident about demand. Remember that inventory that is just sitting is money that is not working for you. Small businesses should also keep in mind that with the speed of reordering and shipping replacing a dwindling inventory has never been easier.
  
• Cut the costs wherever you can-Savvy small business owners will identify and eliminate duplication or wasted effort at all stages of their business. For better cash flow management take the time to examine each of your business processes (manufacturing, sales, customer service, etc.) with a view toward removing bottlenecks. In the long run, this will save you big money and improve your cash flow management.
  

• Do not be sucked into buying things you do not really need-It is important to realize that there is usually a lower cost solution for everything your business needs. You can buy used computers, work out of home instead of leasing space and constantly be negotiating for deals. It is crucial to cultivate an awareness of how to save money in order to manage your cash flow for your small business.
  
• Rush your collections-If you have Accounts Receivable and are owed money should try to collect it as soon as possible. Do not fall into the trap of becoming your customer's creditor. It is especially important that you do not provide goods or services to clients who do not pay you on time. You should consider doing credit checks before accepting clients to help insure that you are not taking on a poor credit risk.
  
• Try to delay your payments-If you are doing business with several vendors then you should try to negotiate longer-term repayment plans. Keep in mind that most vendors will be more than happy to work with you as long as you can provide steady monthly payments. The benefit to this is that the cash you do not have to put into a full payment can be plowed back into your business.
  
• Use your credit wisely-Financial experts agree that if you can't work out longer repayment terms from vendors, use your credit cards to their best effect. It is important to remember that you should charge business expenses to your cards at the beginning of the payment cycle. That way, you can delay final payment by as much as 45 to 60 days.