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Three Easy Steps to GREAT Cash Flow

When a business is having cash flow issues, it is often due to a lack of strategy and structure – not a lack of sales! Many “broke” companies are doing millions of dollars in sales every year. More often than not, fixing cash flow issues by simply bringing in more revenue only leads to more debt, more stress, and more risk for your business.

If you ever hear yourself wonder, “Where does it all go?” where your money is concerned, I can promise you that a key part of the solution is to implement a systematized cash flow structure based around a well-developed financial plan.

Here are three SUPER SIMPLE steps for implementing a strong cash flow management plan for your business:

1) Review your spending. This seems obvious, but too few companies do this regularly or well. You need to know exactly what your costs are every month, and the only way to do that is to take a proactive look at what you’re spending and when. It’s only once you have this knowledge that you can take the next steps.

2) Segment your finances into different buckets. Once you know how much you spend on payroll, operating expenses, COGS, and taxes, you can create different “buckets” - or spending accounts - for different expense types. This is one of the most important cash flow management strategies there is, and when utilized, this alone can change your profit game. Pro tip: Make Owners Comp and Rainy Day Savings two of your primary buckets!

3) Leverage your cash flow structure to steer your business toward your goals. If you know how much you’re spending and you’re proactively managing the money that flows out of your business, you can use your system to set and achieve business goals. Want to expand to a new location? Perhaps you can decrease operating expenses by 3% per month and re-route those funds to a savings account for purchasing the second store in 12 months. Want to bring home $5,000 more in Owners Comp each month? Perhaps you can find a new supplier to reduce your COGS by 5%, taking home the difference.

The application is different for every business, but the process is the same. Know how much you’re spending. Set up structures. Leverage your system.

We work to provide quality information for business owners on a mission, and you can always follow us for tips and strategies to help optimize your company's finances. And if you want help reviewing, creating, and executing a strategic cash flow plan for your business, The SLC Group would love to hear from you! Just send us a message, and we’ll set up a time to chat.



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