You may have heard “cash is king” – or more appropriately – “queen” when you started your business. And while cash flow may be the most critical thing to growing your business today, many business owners don’t really know what this buzzword means and how to monitor or manage it. So why should you care about cash flow and what does it mean for your business in 2019? We’re here to break it down for you.
What is cash flow?
Cash flow is a term for the money that moves in and out of your business. Cash coming in is likely from customers or clients who are buying your product or service. Cash going out could be due to regular expenses, like rent, loan payments, or payroll. Achieving the perfect balance of money in and money out – and ensuring expenses don’t become more than your revenue or profits – can be a challenge for small business owners, which is why it’s so important to keep cash flow top of mind for business success.
Why is cash flow trending right now?
Cash flow is a struggle that almost all small businesses face. Recent tax cuts, regulatory rollbacks and other stimulus policies have benefited small businesses, but some are still weighed down by cash flow issues. More than 2 in 5 (42%) small business owners have experienced cash flow issues in the last 12 months, according to a recent QuickBooks report.
Why should cash flow be your 2019 resolution?
The goal of any business is to become “cash flow positive,” where you have more money coming in than going out. Being “cash flow positive” will help you do things like pay for more inventory, hire a new employee, grow your business and become profitable. If more cash is going out than coming in, this is when your cash flow becomes an issue. In fact, among small business owners who have had cash flow issues, nearly a third have been unable to pay vendors, pay loans, or pay themselves or employees.
How can you make cash flow your friend in 2019?
First, try to understand the big picture when it comes to your finances. Talk with your accountant or create a cash-flow projection tracker, like SCORE’s cash flow projection spreadsheet. If you find that your cash-in and cash-out does not align, focus on the following aspects of your business:
What if you can’t achieve a balanced cash flow?
A lack of cash is one of the biggest reasons small businesses fail, especially new small businesses. But not to fear! There is always a solution to cash flow woes. Working capital, like QuickBooks Capital, can help to cover cash shortages, if needed. And don’t get deterred! Some months, especially if you are a seasonal business, will be better than others. Don’t be afraid to ask your accountant for help or go out for a loan.
Will achieving a balanced cash flow be one of your 2019 resolutions? Let us know!