Cash is the lifeblood of any business. If you can’t master cash flow, your business may not last long: 29% of small businesses that fail run out of cash, and 82% have some kind of cash flow problems.
Managing cash flow may sound simple—just make more money than you spend—but for many small businesses, it’s trickier than it sounds. The first step to better money management is understanding where your money is going.
Here are 13 must-read money management tips for small businesses.
Cash is king
It’s more and more possible for small businesses to go completely cashless, and there are some significant benefits, starting with the clear paper trail for cashless payments. But as long as you’re accepting cash, you’ve got to create rock-solid systems for keeping track of it.
- 1. Start by literally keeping track of cash coming in and going out. The free Clover app Cash Log tracks all cash transactions and cash drawer activities.
- 2. Minimize customers’ use of cash when you can—consider using an app like Donate at Checkout, which lets customers donate change to charity.
- 3. Keep track of the sales tax you owe, and set aside money daily so you’re not hit with a surprise bill. The DAVO Sales Tax app automatically collects, files, and pays sales tax for you.
Manage your inventory to manage your money
- 4. Keep your inventory as lean as possible.
- 5. Make sure you’re moving product quickly—inventory that sits in your store is costing you money.
- 6. Reduce shrinkage by tracking inventory better.
Get paid—on time
Late payments cost small businesses $3 trillion a year, and small businesses spend an average of 15 days a year chasing late payments, according to research by Sage. Don’t let your business become a statistic—make sure your clients are paying you promptly.
- 7. Create an organized system for invoicing your customers.
- 8. Set clear payment policies so customers know when payment is due and when a late fee will kick in.
Crunch your numbers
Small business money management all comes down to a few key numbers. Dig into the data to make sure that you’re making money on every single sale.
- 9. Run a break-even analysis on new products to make sure you’ll be able to cover your costs.
- 10. Negotiate for better deals with key suppliers and vendors.
Create good accounting systems
Most small business owners start out doing their books themselves. As your business grows, that job gets bigger and bigger, and you may want to hire an accountant. But no matter who is doing your books, you need strong systems to make sure you’re managing your money well.
- 11. Create checks and balances and backups so you’re not just trusting anyone—even your accountant—to handle your money for you.
- 12. Take a basic accounting class to help you better understand how your business’s finances work.
Get quick cash in a pinch
- 13. Know where to turn if your business needs a quick cash infusion. Clover Capital, for example, can get you a cash advance in as little as 3-5 days, and you’ll repay automatically from your daily sales.
Clover is sold by leading U.S. banks including Bank of America, BBVA, Citi, PNC, Sun Trust and Wells Fargo. You’ll also find Clover at our trusted partners including Ignite Payments, Restaurant Depot, and Sam’s Club. For more information, visit us at clover.com.