Cash Flow Management Tips for Entrepreneurs

 According to the United States Small Business Administration (S.B.A.), about 65% of new businesses do not survive for more than ten years. Alan Safahi, Orinda, an experienced San Francisco entrepreneur, has conducted thorough research on small businesses and entrepreneurial strategies.

Safahi says about 50% of small businesses fail in their first five years. Most entrepreneurs focus on running their businesses without streamlining their cash flow management, one of the most significant factors leading to business failures.

Therefore, keeping a close eye on your account balances is critical for business success. Otherwise, you may lose track of your expenses and fail to achieve your financial benchmarks. Alan Safahi Orinda argues that cash flow management is not challenging and requires creating a workable system to manage day-to-day cash flow.

Track Accounts

Mot entrepreneurs in the United States have a business checking account. Although you can have other business accounts, a checking account is the most common one. It will help if you track your transactions going into and out of your company accounts daily or weekly.

You can do this using a paper register or online. Reconcile your business accounts monthly by comparing your bank statements with your company’s records. The purpose is to correct discrepancies, remove errors, and achieve accurate data.

Categorize Expenses

Tracking your business expenses is one of the challenging tasks because you have to keep an eye on your bank accounts. It requires you to spend a lot of time reviewing your accounts.

However, you can avoid this issue by categorizing your expenses, such as equipment, loan repayment, inventory, and marketing expenses. Categorizing your business expenses helps you prepare for upcoming budgets and analyze areas that require improvement. The primary objective is to reduce expenses and streamline profits.

Create Room For Reserves

Building reserve funds into your business’s operating budget is the best way to manage your cash flow and mitigate the risk of errors. Bear in mind that unexpected expenses can post a cash flow challenge or emergency, primarily when your revenue and profits cover your company’s costs.

Therefore, set a S.M.A.R.T goal and analyze the amount of money to keep in your reserve account. Check your balance every time your track your business account transactions. Cut your expenses or make efforts to increase profits if your reserve fund decreases or drops below the minimum amount.

Automate the Process

Although entrepreneurs can track their finances via spreadsheets or a piece of paper, Alan Safahi Orinda recommend automating your cash flow management. The purpose is to reduce the risk of human errors.

You can find multiple tools to automatically handle your cash flow. However, Safahi recommends purchasing a premium tool that offers effective cash flow forecasting and lets you see your business accounts from one place.

You can use the automation tool to recognize patterns via data-based insights and analytics. Thus, you can plan for balance forecasts in the future and improve your business’s cash flow management.

Originally Posted: https://alansafahiorindaca.wordpress.com/2022/08/04/cash-flow-management-tips-for-entrepreneurs/