Cash Management Tips for Your Business

Cash Management Tips for Your Business

Something that is not widely known is that Michael Gerber of e-Myth fame almost had to declare bankruptcy in the 90’s because he had left all the financial management to a partner. He didn’t really want to bother himself with those “details” because he was much better at, and completely loved, working with clients and franchisees developing and delivering programs.

It took a number of years for him and his wife to pull the company out of a really bad spot and went on to become more successful than ever. And with one less partner.


Don’t fly by the seat of your pants. Project your income, expenses and cash flow and then track them. However you delegate the details, make sure you know what’s going on and completely understand the processes involved. Break those financial records into product and service lines so you know what is selling and how profitable each product is. This is crucial information for making management decisions, including where cash is coming from and where it is going.

Review and revise your projections regularly and frequently to spot any challenges that may catch you by surprise – challenges like bad weather causing cancellations or slow walk-in traffic, an election or economic downturn that makes people tighten their purse strings, a big client who suddenly becomes a collection problem. You’ve been there. You know what I mean.

Put overdraft protection in place to avoid an Oops! because you didn’t make it to the bank before closing. Don’t treat it like a line of credit. This is really just for overnight coverage.

Establish operating lines of credit before you need them and only use when absolutely necessary, paying them off as quickly as you can. These are not intended as long term debt instruments, but to provide short term funding for day-to-day operations to cover gaps between your company’s payday and the payday of your employees, for example. Or to cover the cost of an unexpected opportunity that you know can pay back within a few months.

Longer term loans are a different thing. They usually come with fixed interest rates and payment schedules. Never miss a payment on these or any other loans. Your payment history is a big determinant in your ability to acquire credit in the future.

Set up an emergency fund and a “savings” account for your business –separate accounts where you can squirrel away excess dollars until you need them. Invest the savings portion of that money as soon as you are comfortable that it won’t all be needed for other things in the near future. This can be your seed money for expansion down the road. When applying for loans for capital expansion, most lenders still want you to have some skin in the game before releasing funds to you. This cash or investment reserve ensures that you will be ready to put up your portion of any expansion money.

Keep your eye on the money and the money will take care of you.

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