Business Resources

Manage Your Cash Flow Effectively

Managing Your Cash FlowYou’ve likely heard that cash flow is the life blood of your business. Without a good grasp on how cash is flowing in and out, many businesses fail. Managing cash flow can be challenging, but we’ve put together some strategies to help you.

1. Know Your Business’ Working Capital Needs
Your working capital may include inventory, unpaid invoices, cash tied up in investments, operational expenses and the length of time you need to pay a supplier. Before you can effectively manage your cash flow, you’ll need to understand how all of these elements work together.

The best place to start, is to create your budget. Write down all of your expenses and when you’ll need to have the bills paid, plus any additional expenses such as marketing and administrative expenses. Then compare to your cash coming in. If you have more going out than coming in, you may have a cash flow problem.

2. Anticipate Your Future Business Needs
Many businesses have a seasonality. You’ll want to structure your cash flow accordingly to ensure you’re covered during these down times.

Having a healthy safety net is a good idea. A good rule of thumb is to have 3-6 months of expenses saved up to cover anything that may come up. Set up automatic transfers into your business savings account to help you save.

3. Keep Your Cash Working
Make your cash work positively for you while you’re not using it. Put it in higher interest accounts, such as a Business Money Market or Business Certificate of Deposit, or an interest bearing Business Checking Plus.

You may also consider investing it, depending on the amount of time you can keep it tied up. Rivermark has partnered with Money Concepts to give our business members access to investment options. Our advisor is available to meet and understands your needs and opportunities at no cost.

4. Make Sure your Vendors and Customers are on Schedule

Your business relies on other people. Make sure you know when your payments are coming in. If you need cash sooner, offer discounts to those who pay early.

Also know when you payments are due. Set up a payment cycle with your vendors and take advantage of discounts for early payment (assuming your cash flow allows). Vendors may be willing to work with you if they know your specific situation, so don’t be afraid to ask.

5. Be Prepared for Shortages

There may be a situation where you will need reserves beyond an emergency fund. A credit card can help cushion your cash flow. Rivermark’s Business Rewards Visa also allows you to easily track expenses within Online Banking.

6. Invest in a Payroll Service

You’ve hired your first employee, now let the professionals take control of your payroll. Payroll is likely your most important expense. The professionals will ensure payments go out on time, and consistently and that taxes are taken care of appropriately. Plus, time management will be one less thing on your plate. Rivermark has partnered with ADP to offer you options to make managing this part of your business easier. 

With smart, intentional planning you can maintain a healthy cash flow for your business. To speak with one of our business experts, please give us a call at 503.626.6600 or 800.452.8502.

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