Managing and Tracking Small Business Cashflow

Managing and tracking your cashflow might not be the most exciting part of your business, but it is of the utmost importance if you want to keep your business running smoothly. Cashflow is the lifeblood of any business, and it is especially crucial for small businesses. Without proper management and tracking of cashflow, you risk putting yourself in a bad financial situation (even bankruptcy) if you ignore your cashflow for too long. 

By contrast, developing an understanding of your cashflow and implementing some strategies helps you ensure your business has the funds it needs to continue operating. Let’s start by talking about what cashflow for small businesses is, then we’ll go over some strategies to help you effectively manage and track your company’s cashflow.

What is Cashflow?

Cashflow is the movement of money into and out of a business over a specific period. It is important to understand the difference between cashflow and profit. While profit is a measure of the overall success of a business, cash flow is a measure of short-term liquidity. A business may be profitable but still struggle to pay its bills if it does not have enough cash on hand. That’s why it is important for you to understand your company’s cashflow to ensure you have enough money to cover your expenses.

Not sure if you can afford to hire a new employee? Or if it’s time to let an existing employee go? Check your cashflow.

How Can Small Businesses Manage Cashflow?

There are several strategies you can use to manage your cashflow, including establishing a budget, setting up financial goals, creating a cash reserve, and implementing strategies to make and save money.

Creating and adhering to a budget helps you plan for future expenses for your business, prevent overspending, and save money in the long run. Setting financial goals helps you track your progress and stay on track when it comes to your budget. Just like your personal finances need a savings account, building up a cash reserve is important for any small business. It provides a cushion in case of unexpected expenses or slowdowns in business activity. 

Finally, there are many strategies for making and saving money you can use to improve your cash flow, such as negotiating better terms with suppliers, reducing overhead costs, and investing in marketing strategies to attract new customers.

How Can Small Businesses Track Cashflow?

In order to properly manage your cashflow, you need to track them effectively. You can do this with

• Accounting software help you track your cashflow and make sure you’re staying on budget
• Budgeting tools help you create a budget, track your expenses, and ensure your business stays within its spending limits
• Financial reports allow you to track your income and expenses over time, giving you the information you need to make informed business decisions
• Checks and balances are a way of ensuring all your financial transactions are properly recorded so you can be sure all your funds are accounted for.

With these four tools and systems in place, you should be able to easily maintain accurate records of your cashflow.

Conclusion

By understanding your cashflow and implementing some strategies to manage it, you can ensure your business has the funds it needs to continue operating.

Financial management is an ever-evolving process, and it’s important for small businesses to stay up-to-date on best practices to ensure their success. But you’re busy running a small business, which means you have plenty of other things on your plate. 

Rather than worrying about the latest updates in cashflow management and tracking, why not let a professional handle it while you focus on serving your customers and growing your business? If you’re ready to talk to an accountant who can track your cashflow and keep your business in the black, just schedule your FREE consultation now to get started.