When it comes to finances, the difference between success and failure is often the ability to maintain a positive cash flow. We have this goal in our everyday lives: we seek to earn enough to pay the bills each month while saving strategically for long-term investments that will fuel future growth. The same is true for a business. If you are thinking about becoming a small business owner, know going in that your cash flow needs to be a top priority. Here a few simple steps you can take to help maintain a positive cash flow:

  1. Invoice on a timely basis. It isn’t unusual for some business owners to take their time sending invoices, which can seriously hamper cash flow. You might want to specify a certain day of the week or a couple of days during the month as your days to issue invoices. Or commit to taking care of it immediately after a sale is made or work is completed. You can even ask for a down payment up front, a particularly important practice if you incur out-of-pocket expenses to complete the job. If sending invoices and following up is taking up too much of your time, consider hiring an accountant or implementing an online service or mobile app.
  2. Set clear terms for payment. There is no hard and fast rule for what your terms must be. Many small business owners request payment upon receipt of an invoice, or within a specified number of days. The important point is to find what works for your business model and clearly communicate it to clients (ideally in writing). Also, create a repeatable system for following up if payments are not received on time.
  3. Track expenses. The downfall for many businesses, particularly in the early months of operation, is a failure to keep spending in check. While it may be necessary to spend to get your business off the ground, create the habit of recording all expenses and keep an eye on your overall spending pattern. And, keep your business accounts separate from your personal ones so that you have a clearer line of sight into your cash flow.
  4. Be cautious with debt. Many startups or smaller businesses finance activities through bank loans or by building up credit card debt. The latter, in particular, is an expensive form of financing that could impact your personal finances fairly quickly if not used responsibly. If you’re unsure about how to finance or move forward with your business, consider consulting a business coach or financial advisor.
  5. Minimize credit to customers. Depending on your business, some customers may seek to make their purchases on credit. If you determine that this is workable for your business model, be diligent in assessing the customer’s ability to repay you on a timely basis and following the terms you set up in step #2 above.

Cash flow management is one of the cornerstones of any business plan. If you want support or have questions along the way, schedule meetings with a lawyer, accountant and financial advisor who can review your finances and business plan in more detail.


Andrew R. Petty, CRPC®, APMA®, is a Private Wealth Advisor with Marlowe, Petty & Associates, a private wealth advisory practice of Ameriprise Financial Services, Inc .  He offers fee-based financial planning and asset management strategies and has been in practice for 16 years. To contact him, please call 407-249-4006, visit his website at www.marlowepetty.com or stopover at his office at 10917 Dylan Loren Circle, Suite A, Orlando, FL 32825.

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