Bookkeeping for Small Businesses

The Importance of Bookkeeping for Small Businesses when It Comes to Managing Cash Flow

Bookkeeping for small businesses involves a number of responsibilities. Cash flow generation and management is a big concern for many owners of small- and medium-sized businesses. Unfortunately, many owners do not realize that improper bookkeeping for small businesses can create an obstacle to consistently generating and responsibly managing cash flow. TheOfficeSquad knows how important it is to keep your business in the black. We believe that responsible bookkeeping for small businesses includes understanding how to generate and manage your cash flow.

What Is Cash Flow?

When it comes to bookkeeping for small businesses, cash flow can be quickly defined as the movement of your company’s funds on a daily, weekly, monthly, and yearly basis. This includes the income you’re earning and the expenses you’re generating. All small business owners have a goal to generate positive cash flow, which means you’re generating more money than the business is spending. Negative cash flow means the opposite: your business is spending more money than it’s generating. When handling bookkeeping for small businesses, it’s important to remember that the positive cash flow does not necessarily mean your business is profitable. Cash flow involves much more than profit and loss, which is why understanding how to generate and manage cash flow is essential when bookkeeping for small businesses.

How to Generate & Manage Cash Flow

The million-dollar question when it comes to bookkeeping for small businesses is this: how can you generate positive cash flow? You should know that improving cash flow does not necessarily mean growing your business. You can succeed in growing your business and increasing your profits while still not positively impacting your cash flow. We believe that these ten tips will help you generate and manage positive cash flow:

  1. Monitor your cash flow as often as possible. You can use resources like QuickBooks to streamline and simplify your financial recording.
  2. Increase your profits. Although it goes without saying, maximizing your sales can help improve your positive cash flow.
  3. Reduce operational costs. Operating expenses can add up quickly, however, you can dramatically reduce your costs by finding areas to responsibly eliminate expenses.
  4. Generate cash flow from existing assets. If your company utilizes assets, such as real estate or equipment, these items are tying up your cash. By selling these assets and choosing to rent or lease new assets, you can free that tied up cash.
  5. Limit the credit extended to customers. If you’ve noticed that you’re extending credit to many of your customers, consider reigning it in.
  6. Offer incentives to customers who make early payments. If you and your customers normally agree 60- or 90-day payment terms, consider offering an exclusive discount to those who pay their invoice in full within 30 days to keep your monthly cash flow stronger.
  7. Don’t delay your invoicing. It’s important that you invoice your customers as quickly as possible to ensure that you receive your payments as swiftly as possible.
  8. Work out new payment terms with your vendors. If you aren’t able to receive payment for your invoices as swiftly as you need, consider asking your vendors for extended payment terms so you can pay your invoice in full as soon as you receive payment from your customers.

Let TheOfficeSquad help you maximize your cash flow. Our services include bookkeeping for small businesses to help create positive cash flow. Contact us today at 702-649-3495 to learn more about our comprehensive bookkeeping services.