Why cash flow and budgeting are essential for your small business
Cash flow. Budget.
We hear these words all the time, and it’s easy to pass them off as buzz words that don’t really mean anything.
Is that true?
Nope. Not one bit.
Everyone deals with money personally and (or) in their business, so it’s essential to know that money’s life cycle and where to put each dollar you earn.
“A budget is telling your money where to go instead of wondering where it went.” - Dave Ramsey
Before we dive in, here’s a REAL WORLD example of why knowing your budget and understanding your cash flow is crucial to your business.
At Pinnacle Flow, we LOVE this topic! Watching our clients grow their businesses is the best feeling… and it all starts with getting to know your numbers… through cash flow and budgeting.
So why does this benefit you anyway?
Budgeting and knowing your cash flow cycle puts YOU in control of your cash.
Budgeting means knowing where every dollar goes - you’re assigning each dollar a job, and your cash flow shows you exactly what that looks like.
Over time, you can look at cash flow trends to budget further out in time. This is where the magic happens… because now you can start to get really strategic and plan for growth-related expenses, such as hiring a new team member.
Now that you know a bit about cash flow and budgeting. Here are a few tips for excellent cash flow in your business…
Review your financial statements, at least, monthly. See what’s taking up a piece of your expense budget and ask yourself if you’re getting the return on investment you need to justify that cost. A personal example - we paid $35 a month (for several months) for a pro subscription on a popular survey tool and the return on our investment? $0. When reviewing our expenses, it was pretty obvious- cancel the subscription.
Save a little each month for the unplanned stuff. Don’t use your credit card as an emergency fund. If your computer breaks down, have enough saved to replace it right away.
Follow up on outstanding invoices consistently, and make it easy for clients to pay you by using a payment processor like QuickBooks Payments. If you’re not getting paid on time, you likely can’t cover those necessary expenses in cash, so staying on top of those invoices is a big deal.
Be sure to watch our video for more on this topic… 👇
We DON’T want to see this happen to you! Your success starts with getting to know your numbers… and that’s why we’re in your corner.
Contact us today to hop on a discovery call where we can dive into EXACTLY how we can help you grow your business with CONFIDENCE and fantastic bookkeeping systems!