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Manage Your Cash Flow: Top 5 Tips

By: Rachel Newcombe - Updated: 17 Oct 2012 | comments*Discuss
 
Cash Flow Money Finance Tips Managing

For anyone running a craft business, successfully managing your cash flow is vitally important. If you run out of money, you can’t buy new stock or supplies and will have nothing to sell, plus you could get into difficulties with paying staff or suppliers. Managing your cash flow isn’t always straightforward though, so here are some practical tips and ideas to help you get to grips with money matters.

Cash flow is vital to business in all sectors. It sounds drastic, but if your cash flow fails and runs out, and you don’t have any reserves or a back-up plan in action, then your business could fail.

Cash flow can run out for a number of reasons, but the common issues include:

  • Not selling enough products to break even.
  • Having too many overheads and expensive costs.
  • Having customers that aren’t paying you.

Some of these situations can be hard to manage, especially in the case of customers who don’t pay up, or don’t pay for services or goods as quickly as they should, but you need to be aware of them and be prepared to deal with them to keep your craft business going.

1. Do Your Cash Flow Budget Weekly

Before you launched your craft business, you should have produced a business plan and worked out the basics of how much finance you’d need to get started. Now your business is up and running, it’s important to keep close tabs on your cash flow and know exactly how much your expenses are each month.

Sometimes it can be time-consuming to leave the cash flow budget until the end of the month, especially if you’ve also got invoicing to do, so one way of keeping on top of it – and also helping you to get a clear idea of your cash flow – is to do it weekly. This is especially yourself if you’re going through any difficult times with finances, as it can make you more aware of exactly how much is being spent each week.

2. Become a 'Penny Pincher'

When cash is tight, managing your cash flow also needs to be about saving money and making savings wherever you can. It’s really helpful if you can get into the spirit of saving money, or becoming a ‘penny pincher’, cutting down on all unnecessary expenditure and finding better deals wherever possible.

3. Hire Rather Than Pay Upfront in Full

If you need a car or delivery vehicles for your craft business, or you need certain pieces of machinery or equipment, then leasing them on a monthly basis, rather than paying outright for them can significantly aid your cash flow. Although you might end up paying a bit more for them in the long run, it can be a great help not to have large sums going out of your account in one go and smaller payments are a lot easier to manage.

4. Plan Your Cash Needs

Once you’ve got into the habit of regularly checking your cash flow budget each week, you can be more aware of your exact spending needs. Although these will inevitably vary from month to month, you can begin to plan your cash needs and requirements at lot better.

Plan out how much cash you need to run your business each week and each month and ensure you have enough cash available to meet these needs.

5. Organise An Overdraft Facility In Advance

If cash is really tight and there’s the possibility that you may go overdrawn, don’t leave it until the last minute to get an overdraft. Your bank won’t be happy to have to do it at short notice and it can look bad for you as a business.

Instead, plan for this situation and organise an overdraft facility in advance, so it’s there if you need it. The chances are you might not, but it’s a useful fall back to have and can help relieve some of the stress about money and cash.

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