Importance of Managing Cash Flow

For many, the ultimate American Dream is being your own boss at the helm of your own company. About half of the working population (a whopping 28 million of us!) are doing just that. The majority of small business owners, almost 80%, have no employees. For these “self employed” entrepreneurs, not having a payroll is no excuse for not watching cash flow.

Regardless of your talent as a creative artist, success as a top-producer in sales, or reputation as the city’s finest event planner—and even if you hire a professional to manage your books—you need to be actively involved with the cash management of your business.

Why? Cash flow. It’s the barometer of your success. Your business, whatever its size or purpose, must take in more money that it puts out. Period. A negative cash flow is an indicator of trouble and potential failure. But for certain small business owners like those requiring larger inventories, or having payrolls or seasonal spikes in the cost of doing business, periods of negative cash flow are simply times to implement better money management.

One of the better articles on small business cash flow management is from Forbes / Entrepreneurs. The article offers common sense tips like: 1) don’t pay everything at once, 2) pay when you have revenue, on on expected sales, 3) never use sales tax dollars to float operations, and more. Just remember that like most magazine articles, the advice is meant to apply to a broad audience. To know what is right for your particular small business’s cash flow management, we suggest an annual cash flow review conducted by a professional money management team like ours.