Happiness is a Positive Cash Flow – Managing Your Cash Flow

It would be safe to say that it is natural for entrepreneurial businesses to experience cash flow problems. This is why it is so important for you to actively budget and managing your cash flow.

On a regular basis, you need to estimate the cash you expect to receive from customers, identify the payments that are due (payroll, taxes, vendor payments, etc.), and then create an analysis that compares the estimated cash inflows to the payments that are due. From this analysis you create a cash flow budget.

The cash flow budget will provide a guide for you to use to manage your company’s cash flow.

If the analysis shows that a positive cash flow is expected, you can budget to pay all of your obligations on time and take comfort that there will be funds available to do this. If the analysis yields a negative cash flow, you will need to prioritize your payments in the cash flow budget in order to conserve your liquid funds.

An additional benefit to cash flow budgeting is that it gives you an early warning that you need to start collected receivables from your customers or hustle to increase sales. At my entrepreneurial public accounting firm, CPA for Small Business, I regularly review and make cash flow forecasts. Doing so keeps me from being surprised when cash flow slows down.