Managing Cash Flow 101
When you’re running your own business, there’s no one cutting you a paycheck or ensuring you meet payroll. The buck stops with you, and you’ve got to hustle if you want to keep the cash coming in. Part of being a Smart Hustler is staying on top of your business’s cash flow.
Even if you’re not a numbers person, cash flow is pretty simple to understand. It refers to the “flow” of money into and out of your business—the payments in from customers (receivables) and the payments you make to vendors and others (payables). Just like you keep tabs on your personal finances by checking your bank balance online to see which payments have been made and how much money is in your account, you should keep tabs on your business’s cash flow to make sure you have enough money to do what you need to do—buy products, pay your employees, handle your debts and reinvest in your business.
Online accounting software tailored for small businesses has made managing cash flow simpler than ever. Ideally, you want accounting software that is simple enough for your current needs but has the potential to grow with your business. QuickBooks Online is a popular product for all kinds of small businesses, but others to check out include Xero, Sage One and FreshBooks. Look for a program that integrates with your bank account; that way, deposits and payments will show up as they’re made so you always have up-to-date information.
But don’t assume software can do it all. You need an understanding of the basics of accounting—even if an employee or accountant handles most of the day-to-day. If money management isn’t your strong suit, do what other Smart Hustlers do—get help. Local community college or adult education programs offer classes in accounting, and nonprofit organizations such as the Small Business Development Center or SCORE provide free education in the subject. (Disclosure: The SBDC-LA and SCORE are clients of my company).