Fewer than 150,000 businesses were started in 2010, and more than 225,000 closed that same year, reports the Bureau of Labor Statistics. For your business to succeed, you must manage your cash flow. It's the lifeblood of every business:
Be Conservative When Purchasing Start-Up Supplies
Many new business owners go overboard on stock. Yes, you need office equipment, inventory and maybe a delivery truck, but don't go hog wild as you prepare to start your business. A conservative approach allows you to start with the bare essentials and build up to that swank office as money becomes available. To find affordable start-up supplies, the Small Business Administration recommends you check out government surplus stores. Likewise, Craigslist or auctions offer deals on everything you need to get your business up and running without spending a fortune.
Place Money Into Savings
There's nothing like the panic you feel when your bank account is empty and bills are due. A cash reserve can prevent that. According to SCORE, consider saving enough money to cover at least six months of expenses. You can create a reserve when you know how much your expenses really are. Then, prioritize saving every week because, even if you can only afford to save $50, something is better than nothing.
Chances are high that you need credit from either a bank loan or a credit card to start your business. As soon as you can, apply for a bank loan or open an American Express credit card in your business name. Both options give you access to the cash you need to build a positive credit history, finance a planned purchase or pull through challenging times while waiting for a client to pay an invoice. Just be sure you don't overextend yourself or you'll be in up to your eyeballs with no end or success in sight.
Get Paid on Time
Managing your cash flow, making ends meet and maintaining your good credit rating are impossible when your clients don't pay on time. Entrepreneur.com suggests you request clients pay a portion of the total fee upfront and offer a discount to clients who pay in full before services are rendered. Additionally, hire a bill collector to obtain money from a chronically late payer or politely tell a non-paying client that you can no longer provide services.
Talk to a Professional
As an expert in your field, you may think you have it all together when it comes to money. And maybe you do, especially since you use accounting apps that track your expenses, income and inventory. Possible apps include:
- Outright, $9.95 a month, is accessible from any computer. Create quarterly and annual reports and sort all your information.
- Web-based service Intacct charges a customizable fee based on how much you use it. It handles expense reports, inventory and purchasing.
In addition to these helpful accounting tools, ask for help. A financial or tax professional gives you the assistance you need to find financial success. In addition to working with you to create accurate financial records, a professional guides you in complying with tax regulations and correctly managing your business's cash flow.