Cash Flow Management Tips For Small Business – Behalf

By March 17, 2016Cash Flow
Restaurant owner couple smiling as they have successfully managed their small business cash flow.

According to Dun and Bradstreet, more than 90% of small business failure is accredited to issues with cash flow. The magnitude of this number is enough to scare any potential entrepreneur. What can you do to ensure you’re not within the 90%?

Cash flow management explained

Cash flow management means being aware of every inflow of cash, as well as every outflow. Good cash flow management means your small business has greater cash inflow than outflow.

Maintaining a high inflow of cash may sound simple on paper, but it can be incredibly difficult, specifically in industries with large amounts of upfront costs.

Let’s take an in depth look at an industry that has a large amount of upfront costs to evaluate how they can lower their upfront costs and reduce risk.

A look at the restaurant business

The stats say it all; restaurant businesses are 59% likely to fail within their first three years. And, more than 35% of restaurants run by new entrepreneurs close within their first year.

Restaurant owners, among others who work in the perishables industry have to account for the proper storage equipment so their merchandise is kept fresh. How can you manage your cash flow, even in the perishables industry?

1) Get creative

Before you have cash inflows, consider unique ways to cut down on initial costs. For example, choose to sublet a location so you can save up to rent your own place.

2) Do your market research

Making sure your sales projections are realistic is crucial. Research the average cash flow cycle within your industry and within your location. This can give you a fairly accurate picture of how much you should stretch your expenses so you can manage your cash flow efficiently.

3) Work with lenders that respect your cash flow calendar

Taking out business financing should be an opportunity to grow your small business. Ensure you’re working with lenders that help you grow and develop as a business, by choosing ones that let you make payments on a schedule that you choose, thereby streamlining your cash flow management.

Looking to the future

As a small business owner, you need to know you can make it through periods of low cash inflow. Ask yourself, if you make 50% less, how would you get through the next three months? Realistic expectations and planning can help you stay cash flow positive.