3 Things to Avoid Cash Flow Disaster
Posted In Money| Posted By Brad Flynn
Cash to business is like oxygen to humans, if it runs out for long enough you die.
In having worked directly and indirectly with thousands of businesses, the businesses who don’t struggle with cash flow (and thus, their sanity) do these 3 things.
1. They have a Cash flow projection – I also call this your sleeping pill, because it helps you sleep at night. A cash flow projection is your best guess at how cash will flow into and out of your business and the resultant amount of cash you have available as a result. If you cash flow is tight, you will want to look at this on a minimum weekly (or even daily) basis, otherwise monthly is ok. (You can get my cashflow projection tool here).
2. They have Cash cushion – Do you remember jumping off the couch onto a pile of cushions when you were a kid? We did this so we didn’t hurt ourselves. A cash cushion has the same effect just in business. If we do take a fall this will help us not get hurt. I recommend you build up to a minimum of 3 months of operating expenses cash in a separate bank account.
3. They have a separate tax bank account – The number one thing that takes business out of action around the world is the tax (IRS) department who collect the money we owe the government. Every time you get paid by a customer put a portion of that aside into a tax holding account. Then when it comes time to pay your tax bill, you will have the cash there.
If you find you are unable to do these 3 things above, there will be something wrong with either your margins or sales volumes, which should be set up to give you the excess cash for the above.
👉Just book a quick chat with me and we can sort that out real quick.