For small business owners, cash flow may be a challenge during normal times. These are not normal times. The continuing COVID-19 emergency is putting at risk the survival of many small businesses. Now, more than ever is the time for all owners to engage in a new kind of planning; new ways of monitoring and projecting cash flow. We can all agree that the best way to navigate any crisis is to be fully prepared. One of the most important ways to be prepared is to understand and forecast your cash flow on an ongoing and scheduled basis when it comes to your business. Is your business headed for a cash flow crisis? Here are five situations to to watch out for:
- You do not have a cash flow projection for the next six months.
- Current cash reserves will not cover expenses for the next 30-90 days.
- There are no tools or systems in place for measuring the effect on cash flow if revenue decreases 10-30% or more.
- You are uncertain of your cash breakeven point.
- You are uncertain of how to develop a cash flow projection system.
Even in normal times, many business owners run into problems with cash flow. They have a hard time finding their way out without leveraging a lot of credit. A typical scenario is that bills and invoices need payment immediately, but the incoming money is delayed because of production costs and other factors. Even if you know that you will be able to sell the product in the future, it might be hard to keep the business afloat.
During a shutdown, reduced income is a reality. One of the best things that you can do is contract out your accounting services. A small business accounting firm that offers CFO services will conduct a cash flow analysis of your funds to take a proactive approach to controlling your cash flow.
A CPA will help you look at monthly, quarterly, and annual reports so that you can see how much money you have brought in and the anticipated profits in any given period. This information will help you manage cash flow by using better financial decisions so that you aren't spending more money than you have available.
Let me know when you would like to talk. As planners, we are here to assist you in navigating simple solutions.
Stay safe, stay well, and stay tuned,
Charles and the Myrick CPA Team
If you want to achieve long-term financial success with your small business, contact us to learn more about the small business accounting services that are available. We work with clients located in the Washington DC area, and we also offer virtual business services for clients located anywhere. Contact us today to learn more: (202) 789-8898