As an independent consultant you understand that strong cash flow is the fuel that can skyrocket your business to new heights, or cause it to skid off the road when it gets squeezed. To avoid cash flow’s potential feast or famine effect it’s best to manage its ebb and flow throughout the year, and make sure it stays as level and consistent as possible.
Many small business owners and consultants mistakenly shrug weak cash flow off as “just the way things are”—avoiding difficult business decisions, paying themselves last, or living hand to mouth. If you’re unsure whether a dip in cash flow is just a fluke or a severe warning sign that your business is in trouble, take our short quiz below.
Rainwerks Cash Flow Quiz
If you’ve answered “Yes” to 3 or more questions from our quiz, then it’s time to get some help managing cash flow in your business. Luckily, you can improve your cash flow and gain valuable insights by mapping out your business goals. You can get your business back on track by understanding how your income and expenses change during the year, and accurate forecasting will allow you to make purchasing, hiring and marketing decisions at the right time without fear.
7 Ways to ensure you have a healthy cash flow in your business
- Create an annual business plan and calendar. Benjamin Franklin once said: “Those who fail to plan, plan to fail.” An annual business plan helps you get a handle on upcoming income and expenses. Gain even more control by revising your business plan regularly, and indicate any seasonality in sales so you can set aside the cash you need to make it through the slow times.
- Seek outside help. The Take the Arrg Out of Accounting™ software can help you learn how you can budget and keep track of your revenue and expenses. This Rainwerks’ simple tool can help you keep your accountant informed and your money straight.
- Cut unnecessary spending. Track how much time and money you spend to complete projects and cut unnecessary expenses. This exercise also allows you to create more accurate estimates for similar projects in the future.
- Shorten your billing cycle. Take a look at how long your clients are taking to pay you, and see if it’s possible to shorten that time in order to get paid faster. For example, make sure that a new client’s Accounts Payable department has you set up in their system before you bill.
- Offer retainers. In a retainer relationship, your client accesses you for a specific time period, and you can specify the scope of your involvement, the duration of your involvement, and how long the retainer will last.
- Have a contingency plan. Even the best financial models cannot predict the future and surprises always occur. Write down any assumptions you’re making inside your business plan and develop ways to mitigate those risks before they occur.
- Raise your fees. If you feel frequently squeezed by tight cash flow, it could be a sign to bump up your prices. If you need help in setting your fees, check out Rainwerks’ free video series, The Right Price and our program Pricing to Prosper.
Avoid the hills and valleys caused by slow cash flow and learn how to budget and keep track of your revenue and expenses without Quickbooks. Rainwerks’ Take the Take the Arrg Out of Accounting™ is a simple tool to help you keep your accountant informed and your money straight. Watch our FREE video today to learn more.