How to Protect Your Cash Flow

Advice from an experienced private wealth strategist on how small businesses can be mindful of their cash flow and do more to keep it steady

When you’re running a business, managing cash flow is probably one of the most important aspects of your job. A healthy flow ensures that salaries get paid on time that your business can grow, etc.

Without healthy cash flow, however, things can take a turn for the worst very fast.

In the UK, roughly 38% of small business owners that report cash flow problems have been left unable to pay their debts on time in the past. Unsurprisingly, this leads to several personal and professional issues, and due to similar problems, some people were forced to close their businesses down.

That means, if you want to secure your future financially, you need to make sure to protect your cash flow to the best of your abilities. Some outside factors affect your cash flow in ways you simply can’t have control of. However, there are plenty of steps you can take to protect and even enhance it.

Today, we’re talking to lawyer Bobby Gill, a Private Wealth Strategist at GC Wealth, who spent the last two decades advising companies, businesses, and individuals alike on how to protect their assets, wealth, and cash flow.

What Should You Care About Cash Flow So Much?

Before we talk about how to protect your cash flow, we should first establish why it’s so important in the first place. Corporate lawyer Bobby Gill explains that cash flow is both the outflow and inflow of money from a certain business. You need cash flow if you want to keep your operations going, inventory stacked, and employees paid, among other things.

Simply put, without money going in and out of your company, you wouldn’t be able to keep your business afloat. If your liquid assets are increasing, your company has positive cash flow and if they’re decreasing, your cash flow will be negative. Without positive cash flow, you won’t be able to give monetary returns to your stakeholders, pay operational expenses, or reinvest in your business.

You need cash flow if you want to keep your operations going, inventory stacked, and employees paid, among other things.

How to Protect Your Cash Flow

That’s not all. Bobby Gill explains that good cash flow has numerous other benefits, including:

  • Gives you a strong position when negotiating with lenders
  • Allows you to negotiate lower prices from your suppliers
  • Give your employees the confidence in your business

Those few reasons should be more than enough to convince anyone to be more mindful of their cash flow and to do more to protect it. Here are a couple of things you can do to manage, protect, and boost your cash flow:

1. Stop Focusing 100% on Profits

Every business wants to increase clients or sales and earn more money in the process, right? However, having a profitable business doesn’t automatically mean having proper cash flow. Working as a corporate lawyer for over 2 decades, Bobby Gill has seen several examples of this. He explains, if your products go through a long sales chain, but your customers fail to pay on their invoices for 3 months, you’ll technically be profitable, but you won’t have any cash on hand. On the other hand, you can also have good cash flow without making any profits. What you need to realize is that both are necessary for success and require the same amount of attention.

2. Watch Out For Rapid Growth

A vast majority of new businesses will struggle with cash flow at some point. But if it happens when you least expect it, your company may not be able to continue operating. Most people don’t expect things to go south during a growth spurt. But as Bobby Gill warns, expanding too quickly may actually cause your business to fail. A sales spurt, for instance, may increase your operational costs and lower your profit. Failing to make adequate changes may impact supply and decrease the flow of cash.

3. Try to Forecast Your Cash Flow

Although no one can know for sure what the future holds, there are certain things you can actually predict. For example, numerous factors could impact your sales in a positive or a negative way. In turn, your sales numbers will have an effect on your cash flow. If you’re expecting a surge in sales, you know that your operational costs will go up so you can prepare yourself properly. Mr Gill advises going through a number of different scenarios that could impact your business operations in both a positive and negative way.

4. Try to Speed Up Payments

First off, you should make sure to send out invoices immediately. Waiting for a few days to send an invoice will not only look unprofessional, but it will also give the impression that your company doesn’t need the money immediately. Bobby Gill recommends that you send invoices right away and encourage your customers to pay on set dates. Also, if they’re overdue, you should send them a notice as soon as possible. Getting paid as soon as possible is better for your cash flow than calling a debt collector and waiting months to get paid.

5. Use Cash Flow Management Tools

If you’re running a business for the first time, you need as much help as possible. Therefore, you should use accounting software that will help you keep an eye on and regulate your cash flow. Solutions like QuickBooks and Sage have cash flow add-ons, that can help you with everything from keeping documentation to making predictions. Bobby Gill recommends you try out a few management tools, to see which works the best for you, before settling for one.

Always Consult a Professional

Last but not least, make sure to contact a professional if you’re experiencing any cash flow related issues. As an experienced corporate lawyer, Mr Gill knows firsthand that communicating your problems as early as possible gives you the best chance of handling them on time and avoiding any additional financial issues down the line.

You simply can’t just let things happen and hope they’ll sort themselves out on their own. The cash flow problem can potentially impact your credit and limit the number of financial options. Consult wealth management before anything like that happens and you get left strapped for cash.

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