FINSYNC Services partner PeachBPO's Michael Howard shared some insights into cash flow management that your business would be wise to review. Michael Howard - PeachBPO  

Most business closures happen due to poor cash flow management. If you manage a business, you likely already know this. To say that this statistic is an indicator for prioritization would be a bit of understatement. It is a watchtower beacon, a neon arrow, and a spotlight on the most important thing upon which a business should keep focused.

Why Cash Management is Important for Business 2

Cash management sounds like something that is left to folks with degrees in finance and accounting. Truth be told, at some point a higher-level skill set is needed to optimize and advance cash management practices within an organization. However, basic practices in cash management can be done with the mathematical education that a 3rd grader receives. The concepts are generally practical and with effort and practice can be well understood. So why do companies suffer so frequently from poor cash flow management?

Well, there is not one answer. Some businesses do not know how to effectively do cash management. Others do but have taken their eyes off cash flow because their attention has been pulled in several directions at once. Often lack of foresight can leave one’s cash position in a place that is insufficient to meet the demands of future business operations. And of course, there is something to be said for bad luck; however, even luck can be heavily mitigated against with proper cash management, insurance, and clear processes. This leads us to some good news.

There are tools and resources available to all sizes of business to help them stay on top of cash management. In the rest of this post, we will cover some high-level facets of cash management and discuss solutions you can utilize to ensure you can efficiently and effectively have this part of your management responsibilities in order.

Know How Much You Need

Having your finger on the pulse for the money ins and outs is important. Accounts receivable, accounts payable, daily sales, monthly and annual business cycles, salaries of employees, material procurement, operating expenses, and taxes: all these things are related to payment or receiving of cash. Getting a sense for these things will help you understand how much you need at any given time. As the manager of your business, you are the air traffic controller of the cash coming in and going out. Be intimately familiar with the obligations of your company, the timeliness of your customers' payments, and understand how possibilities may impact your cash positions. You can outsource the maintenance of your accounting records, but there is no substitute for knowing the numbers yourself. We recommend that new owners get involved with the bookkeeping process and recruit help to guide them on best practices. Even when you pass the torch for daily bookkeeping to a dedicated person you should require frequent and timely reporting and set aside time to examine the financial results of your business with them. If you need some help understanding what reporting you should be expecting and how to interpret the information, seek out guidance. There are many resources on the internet you can turn to. My go to for helping folks get plain English information is Investopedia.com. Understanding basic principles of financial analysis is not just for folks on Wall Street. Most actionable insights that can be gleaned from a set of financial reports can be analyzed in a very short amount of time, and you do not have to be a mathematician to get it.

Base Your Business Decisions on Cash Flow

Cash management is not about holding as much cash as possible. Everything has an opportunity cost. When you are in business, you need to capitalize on every opportunity. Holding more cash than required also affects your business profitability. The question is, how? You are holding the cash in lieu of employing it towards helping you make more cash through sales or marketing, investing in cost-saving technologies, or at the very least, setting up a support infrastructure to enable you to work on driving growth, create value, etc. And how will you know if a certain amount of cash is available for investment? Luckily, the answer is again: Cash flow management. As in the previous section, knowing in detail the ins and outs of your regular cash flow will aid in understanding how new pieces of the puzzle may fit into the picture. In the cases of instilling cash into new elements for revenue generation, cost savings, operational efficiency, etc., having this base line will help you overlay the additional cash needed to enact the change. Just as important, it will help you understand if you need to seek additional cash from financing or investors to get the idea off the ground. When you want to make the next step forward into the unknown, starting from an analytical perspective is a must to understand if you are moving in a good direction. There is something to be said for daringly charging into a new vision; however, understanding the consequences and contingencies will help prepare you ahead of time.

Get Processes in Place

Cash management is also related to the smoothness of your business operations. When you have the cash management procedures in line, every person knows what to do, when to do it, and how to do it. If it is inventory management, know the inventory levels; know how much cash is required and how much cash is available. Having an accounts receivable and accounts payable person to stay on top of your aging reports and having them trained on the next steps should a company fall behind or a large payment come due will go a long way to ensure you mitigate the risks of having cash issues. These are just a few examples of how proper, streamlined procedures lead to positive cash management outcomes. Think through the operations of your company in terms of cash management. Are there SOPs in place that will direct the company toward the best course of action? Having this tied down and personnel in position will go a long way to ensuring cash flow will be as smooth as possible.

Wrapping It Up

Hopefully, you feel better oriented with cash management now. To be sure, if you are relatively new to cash management, there will be more to learn, but our hope is to get your compass pointing in the right direction. To tie out this post, we will leave you with a few tips we have found helpful along the way. Likely you will be able to add to this list if you are a cash management veteran, but these items will certainly provide some tactical guidance for those needing to focus on this part of their business.

Tips for Effective Cash Management

Create a Cash Flow Budget

The first and foremost thing you can do is create a cash flow budget that lists all your short-term and long-term finances. This means getting all your expected cash inflows and outflows on a timeline and seeing how your cash balances fluctuate over time. Like the first point mentioned above, knowing how much you need is highly important to effective cash management. A budget is a must.

Increase the Speed of Collections

In other words, get paid as fast as possible. If you have receivables on your balance sheet, monitor the time it takes to get paid. If there are any barriers in the way to a customer paying you, remove them. You want to make it as easy as possible to get paid, even to the point of making it a joy if possible. The fact of the matter is the sooner you get paid, the sooner you have the cash in the bank. It is common sense and seemingly rudimentary; however, it would be a mistake to not mention this in any list pertaining to cash management.

Get Payment Terms that Favor You

Conversely, you should negotiate for payment terms with your vendors that can provide you with as much flexibility as possible. This gives you more room to operate and land those payments on a schedule that comfortably fits your budget. Not every vendor will have negotiable terms. That is ok. But never be shy about asking for terms that fit your needs here.

Have Great Relationships with Sources of Financing

You should not wait until you are strapped to start talking to you banks and potential investors. In fact, that is the worst time to start. Nobody wants to put money in a company that they never heard of and is teetering over the edge. You should start talking to folks that can connect you with capital now while you are just starting or currently have no immediate need. For one, investors and banks will be familiar with you if you have a cash crunch and will likely be more receptive to your needs. Additionally, you can discuss options ahead of time like lines of credit, term loans, etc. If you already know what you will do in the case of a cash shortfall, you will greatly increase your chances of not being just another statistic.

Insurance

Get insurance. And do not wait. Talk to a broker, and ask them what is right for you. One great way to ward off potential cash issues is having yourself covered well if you need to shell out large amounts of money due to a dispute or should an accident occur. The upside of having insurance far outweighs the savings in premiums you might realize by skimping. Even if you never need to file a claim, clients will often require you to carry proper coverage.

Get the Right Tools

Excel spreadsheets are great. Like all roads leading to Rome, all data winds up on a spreadsheet in some form or another. However, there are times when spreadsheets will not cut it. This is usually when the needs go from a quick reference list or an exploration of data to needing a functional and routine platform to perform important work. Cash management is one such case where a dedicated tool is preferable. PeachBPO recommends those with small businesses use FINSYNC as it is specifically geared to manage accounting and bookkeeping functions with cash flow management in mind. This is a must have tool for any business wanting to make cash flow a priority focus.

Need Additional Help?

Depending on your setup and professional background, you may need to get some help getting started or maintaining a great bookkeeping and cash management program. That is why PeachBPO is here. We offer high quality bookkeeping and accounting support for your business at affordable rates, so you can get the attention you need while being free to manage the rest of the business. Additionally, PeachBPO partners with FINSYNC to deliver you the right tools with the right talent. With PeachBPO maintaining your books on the FINSYNC platform, you can see your company’s financial status any time you want.
As the economy starts to reopen and you look to rebuild your business, gaining control of your cash flow can management help you make the most of your financial resources. By FINSYNC  As the economy slowly starts to open back up, many small business owners are starting to ask, “How are we going to get back on our feet?” While there are endless ways to rebuild, many business owners face limited financial resources and simply can’t afford to experiment. That’s why we’ve put together a three-step process you can follow which is rooted in one of the most important concepts for business success: Cash Flow Management.  Cash is the lifeblood of any small business, and, in times of crisis, it’s especially important to understand how you make and spend your cash. Let’s take a look at how you can effectively adjust to your new business reality.

Step 1: Assess the Damage

Before you make plans for rebuilding your business, you need to fully understand your current situation. Start with the financial side of the business. Before you sit down to do a cash flow projection, look at your profit and loss statement, and compare it to previous months or years. This will provide you with a concrete number (rather than guesswork) that reflects how much your small business has actually changed. Consider hiring an accountant to help you with this step to ensure an accurate result. Secondly, you need to look at other changes in your business: layoffs, vendor relations, lost customers, etc. Factors like these will have an impact on how fast you can rebuild your business. 

Step 2: Identify What Changes to Make Going Forward

There is no doubt that COVID-19 has changed your business landscape significantly. The way you and your competitors operate, and your customers’ needs have changed significantly. To understand how your business is going to adjust to these new circumstances, ask yourself the following questions:
  • What are my new strengths and weaknesses?

Take a look at the parts of your business that are working well, and those that need fixing. Perhaps you need to diversify your products, offer your clients new payment methods, or invest further in an online presence. 
  • How are my competitors doing?

There will be market gaps left by businesses that closed down. You may decide your company can fill those gaps by itself, or there may be opportunities to partner with past competitors as you try to rebuild your businesses.
  • What do my customers need?

Now is a good time to start planning out how you are going to rebuild your customer base. Depending on your industry, the exact process is going to look different. Some customer groups will need urgent attention, while others will need some space.
  • How has my industry changed?

An overall analysis of your industry is probably a good idea as well. What has changed? What do you need to do to adapt to new circumstances? And most importantly, how much is that going to cost?

Step 3: Look at Your Future Cash Flow

Now, for the most important part of rebuilding your small business: cash flow analysis. The information from the previous steps will influence what your cash flow projection will look like, and ultimately guide your decisions. Perhaps you decide to invest in a new marketing campaign, rehiring employees, or stocking up on inventory for a new product line. Before making any of these decisions, you need to evaluate how these investments will impact your expenses and revenue. Chances are, you have several things you want to implement, and a cash flow projection will tell you if you can afford them or not.  Cash flow projections can also help you see how long funding will last. This can be useful if you are weighing different funding options, such as SBA loans, credit cards, or small business loans. To get the most out of cash flow projections, capture each course of action in a financial scenario. This way you will be able to see how each option will impact your business. You can do this in a spreadsheet, but cash flow management software will make the process easier. Ultimately, you want to be able to compare different cash flow projections and make educated decisions. FINSYNC provides cash flow management tools, projections, and “what if” scenarios that tie into your accounting and bookkeeping to help you assess your financial health and adjust accordingly. With FINSYNC Pay, you can improve your cash flow by paying vendors with credit cards even when they traditionally don’t accept credit card payments. Rebuilding your small business can seem daunting. If you think there are too many things to take care of right now, we recommend making a cash flow projection immediately. This exercise will help you make informed decisions about the future of your business.
Small business owners who have little time for accounting can lean on the latest technology trends to streamline back-office tasks and gain better insight into their business. By FINSYNC  Technology has a way of transforming everything within an industry. From the way individuals work to the way whole organizations interact, and accounting is no exception. From the invention of the adding machine in the late 1800s right through to the advent of the first spreadsheet software in the late 1970s. Technological innovations have become key components to how small businesses keep their books. The combination of technology and financial services known as FinTech is bringing sweeping changes to how businesses manage their books. Financial Technology has been a game-changer for companies of all sizes. Helping them gain greater control over how they forecast their cash flow, pay bills, invoice clients and more. Technology can help you spend less time on back-office tasks and more time growing your business. Here are the business technology trends that are making small business accounting faster and more efficient in 2020.

All-In-One Accounting for Small Businesses

While many large corporations have long benefited from enterprise accounting platforms that combine accounts receivable, accounts payable and payroll, such all-in-one systems were not available to small and mid-size businesses until recently. That's starting to change as a growing number of smaller firms switch over to using a consolidated approach to managing their finances. This trend represents a marked change from the first migration of small businesses to the cloud, when businesses began using individual software programs to handle their financial tasks separately — what renowned accounting and technology industry pioneer Doug Sleeter calls "chunkification."  The use of a cloud-based platform that syncs various accounts makes it easier to streamline financial tasks. Forward-thinking businesses are increasingly migrating their financial tracking to cloud-based platforms. Those that give them a real-time, accurate snapshot of their financials.  This type of system helps businesses keep better tabs on their financial health. There's no need to wait for bank statements, manually key in receipts, or waste time trying to track down if an invoice was paid. You can minimize manual work like data entry, which frees up time for small business owners to focus on higher-value, strategic tasks.

Rich Data Intelligence

The real-time synchronization of business accounts can also deliver valuable data. As a result, giving you better insight into the health of your business. Cash flow management is a good example. An integrated accounting platform makes it easier to more accurately forecast cash flow. This is because accounts receivable, accounts payable, and future payruns are all in the same database as the general ledger.  Essentially, small businesses now have access to strategic financial analytics, faster than ever. A wider array of more timely data can help you forecast more accurately and strategize accordingly. Whether it is for an individual project or to project the growth of your business. A platform that can automatically issue invoices to customers creates a trail of data that can help you more efficiently assess and predict your company's cash flow. The same approach can be used to assess whether a project is on track to be profitable. Or to identify which products or services you should prioritize to maximize sales.  The Fintech wave is going to continue rising in 2020. Giving small business owners more flexibility in how they manage their finances. See how FINSYNC can help you get started in adopting these technology trends.
Learn how to optimize your cash flow with electronic bill payment while dealing with the unpredictable disruptions of COVID-19.  By FINSYNC  “Cash flow” is a frequent topic on our blog, where we often stress how crucial cash flow projections are for the health of any small business. This discussion could not be more relevant than right now. As our economy grapples with the consequences of COVID-19, more and more businesses can’t predict tomorrow’s financial outlook. Many businesses are still worried about the liquidity of their business despite getting approved for a PPP or EIDL loan. Whether you’ve secured funding, are still waiting for your payout, or didn’t apply for a coronavirus relief loan, there are even more ways you can further optimize your cash flow using electronic bill payment software. 

Tap Into an Existing Line of Credit

Credit cards can be an excellent safety cushion, particularly because the funds are available immediately. You can use credit cards to either delay the impact of expenses until sales pick up, or help your business stay afloat while you wait for other funds to become available.  These days, it’s easier than ever for vendors to accept credit card payments — even for traditionally cash-only payments, such as commercial rent. Intuitive payment platforms allow you to request a credit card payment with only an email address. It’s simple for both you and your vendor: You can send a payment using your credit card, while your vendors receive it in their preferred payment method, be it ACH or check.  However, before using your credit cards, it’s important to get an overview of your cash flow for the next 15 to 30 days.  Two weeks or a month may seem like a short period of time, but given how much things change from week to week in light of the coronavirus, planning for future revenue or expenses can be difficult. Software with a cash flow projection feature can simplify the process by automatically pulling your accounts payable and accounts receivable. A 30-day period is also typically the window before credit card balances start to accrue interest. Unless your credit card comes with a 0% interest rate, that payment will be included in your projection. Additionally, a 30-day period can also account for a PPP or EIDL loan payment you may be waiting for, as these funds are usually received within 21 days.

Schedule Invoices to Maximize Cash Flow

Scheduling your invoices is a simple way to maximize the inflow of money into your business. Recurring invoices provide more predictability to your cash flow. You get a steadier stream of monthly income and can make better predictions about what expenses you can and can’t cover in the upcoming weeks. Scheduling invoices also helps your customers get into a payment routine with your invoices, which can help eliminate late payments.  Beyond that, using electronic bill payment software automates your invoicing and frees up time, allowing you to shift your attention to critical areas such as marketing and sales, which are more important than ever during an economic downturn.

Make It Easier for Customers to Pay You

If you’re turning to electronic payments, chances are your customers are, too. To help you retain more clients, it’s important to give clients the opportunity to pay you with a credit or debit card, or an ACH payment instead of a check.  Ease of payment will ensure payment continuity and improve your cash flow, especially if your small business was relying on cash payments before. If accepting credit cards is new to you, it’s simple to set up a merchant account in a matter of minutes so you can accept credit card payments.   To further simplify the payment process, you can send your invoices online and include a link where your customers can pay you. Enable your clients to pay you with one click, and simplify your accounts receivable management.  

Turn Paper Checks Into Electronic Payments

Do you have clients that insist on paying by check? There’s a solution for that as well: lockbox. With a lockbox, your checks will be converted into electronic payments and deposited into your bank account as ACH payments. You never even have to see the physical check. While lockboxes eliminate the threat of contagions, they also streamline your back office when connected to your invoicing software. A lockbox payment automatically changes the status of the invoice to be paid and gives you visibility into when the cash will be available in your bank account. If you’re ready to take control of your cash flow and implement more electronic payments, try FINSYNC free for a week. Our all-in-one platform allows you to send payment requests electronically and easily accept credit cards. You can also pay your bills through the same platform. Both of these features come together in FINSYNC’s cash flow projection tool that allows you to see how your small business is doing financially.
Regardless of the state of the economy, optimizing your small business cash flow is crucial. Learn how to improve your cash flow in the time of COVID-19, and beyond.  By FINSYNC  For any small business, effective cash flow management is key to longevity and profitability. Unlike profit, which paints a picture of the general health of a company, cash flow projections show how much cash a small business has available at any given point. Knowing this is important, regardless of the state of the economy. However, cash flow analysis is a crucial tool that can help your business weather the rough waters of an economic downturn.  In such times, you should not only be focused on monitoring your cash flow, but also optimizing it. Here are eight steps you can implement today to improve your cash flow in the times of COVID-19. 

Reduce Your Operational Expenses

In times when revenue may be decreasing, the first course of action is to reduce your expenses. This will, of course, look different for every small business. You could cancel equipment leases, adjust working hours for your employees based on current customer demand, or reduce orders with your suppliers. Other areas where you can reduce expenses include subscriptions, office supplies, and any independent contractors working on fixed retainers.

Negotiate with Suppliers

Now is also the time to take advantage of bulk prices and Covid-19 discounts. Ask your suppliers if they are running any promotions during the crisis. If not, take a look at bulk discounts. Not all small businesses can take advantage of these offers as they simply don’t need that many goods. However, you can still enjoy the discounted price by forming a buying cooperative with other small businesses that use the same suppliers. 

Reexamine Your Offerings

Take a close, critical look at the profit margins on your products or services. Ask yourself, what products bring in only mediocre profits? What doesn’t sell as well as it should? This way of thinking can be applied to both products and services.  Profit margins on services can be harder to calculate than profit margins on products. Take a look at the number of hours a project or service takes to complete and compare it to the billable amount. This will give you a good idea of how profitable any given service is. But what do you do with products that perform sub-par that you still have in stock? Consider putting them on sale. This will free up cash and improve your liquidity.

Offer Discounts to Clients

One way to boost your cash flow is to offer discounts to clients that pay before the due date. Yes, you may not be getting the full sum, but getting the cash earlier, especially if you operate on net 30 or net 60 payment terms, will improve your cash flow significantly. 

Use Credit Cards

There’s never been a better time to use credit cards to increase your cash flow or to pay bills that are due before a payment is scheduled to come in. Paying your bills with a credit card, including traditionally cash-only expenses like commercial rent, can buy you some time and free up your cash in the short term. To avoid unnecessary fees, make sure to take advantage of the grace period. 

Evaluate Your Prices

It may feel daunting to increase your prices in a time when people seem to be reducing their spending, and it goes without saying that you shouldn’t increase prices without reason. However, if you’re truly not charging enough for your products or services, your small business stands to lose a lot.

Apply for Funding

Business loans are another good way to improve your cash flow. Right now, there are two funding programs that are dedicated to helping small businesses get through the COVID-19 situation: the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). You can use these loans to pay expenses such as payroll, rent, operating expenses, etc. The PPP loan can also be 100% forgiven if you adhere to specific rules in the eight-week period following the date of receiving the loan. 

Conduct Frequent Cash Flow Analysis

To determine if any of your efforts are producing results, it’s important to analyze your cash flow frequently. A monthly cash flow forecast is adequate, but a bi-monthly or weekly forecast will help you account for rapid changes connected to the COVID-19 situation. For the forecast to be valuable, you need to base it on real numbers that accurately reflect your income, payroll, production, etc.  In addition to cash flow analysis, you can construct different cash flow scenarios to see how increases in your expenses or decreases in your income will affect your runway. In times of uncertainty, it can be difficult to know how your business will be affected. Our advice is to look at several worst-case scenarios and be prepared for them.  Cash flow forecasting is much easier with intuitive cash flow management software that can import information about your income and expenses automatically. These tools allow you to customize different “what-if” scenarios to help you visualize any big changes in your business. Try FINSYNC free for a week to see how the platform can help you get a better sense of your current financial situation.
Does your marketing agency have a clear goal for gross profit margins? Learn from successful agencies and accountants what your goal should be and how to track and attain it. By FINSYNC  Setting a healthy gross profit goal is the first step towards the success of your marketing agency. It can help you price your marketing services more strategically, track how well you’re using your company’s resources to deliver your services, and assess your sales and marketing spending. However, setting a goal isn’t enough. You have to track it on a monthly basis as well. That way, you can spot problems and notice trends in your business. A change in gross margin can indicate several things, such as a problem with a particular client or cost overruns for the company as a whole. It can also show profitability trends and how your business measures against industry standards. Essentially, setting a gross profit goal will give you an understanding of how successfully you’re running your marketing agency. But how high should you set your gross profit goal? 

The Average Gross Profit for Marketing Agencies

Gross profit margins for marketing and advertising agencies have been fairly stable in the last couple of years. In 2019, the average gross profit margin was 23%, only a little bit higher from the margin of 21% in 2018.  Mike Rowan, CEO of KPI Target, says their ideal gross profit is close to the industry standard, landing between 20%-25%. This margin encompasses all the costs that go into running a marketing agency. “When you’re working with an agency versus an independent contractor, we have the cost of office space, the cost of employee salaries, equipment, software — quite a few factors that go into what we are providing. While an agency is in its purest form is essentially outsourced marketing, behind the scenes there are a lot of real costs that go into that. So we factor all of those things into our blended hourly rate.” Mike also points out that many agencies forget some important expenses that drive the burn rate up and eat away at the gross profit. Technology is one of those expenses. One of the big benefits you offer your clients is that they don’t need to invest in things like data providers, marketing automation systems, CRM systems, and other marketing solutions. However, for you as a marketing agency, these software solutions can result in thousands of dollars in expenses every month, which can increase your burn rate significantly. To ensure profitability in your business, make sure to factor technology expenses into the rate you charge your clients.   

The Importance of a Healthy Gross Profit

A healthy gross profit will put you on the path to a good net income, and enable you to cover all other costs of running a business, such as salaries, office rent, insurance, and other overhead costs. It will also leave room for investing in sales and marketing.  Sales and marketing activities are crucial for the profitability and growth of your business. Yet, some marketing agencies neglect to invest properly in these activities, despite recommending it to their clients. KPI Target does the opposite.  “Because we drink our own Kool-Aid,” says Mike, “we run our own sales and marketing programs, and we recommend that clients do the same because we recognize the ROI from it, and it helps us grow.”  Once you’ve set your gross profit goal, you can calculate the level of sales you need to aim for. After that, you and your team can put together a list of actionable tasks that can boost sales. It might be helpful to ask yourself the following questions: 
  •     Am I charging customers enough?
  •     Have I included all expenses into the rate?
  •     Am I allocating enough funds to sales and marketing?
  •     Are there any services that are underperforming?
It can be very useful to reach out to past and existing customers to ask about their purchasing intention and future marketing needs. The responses might provide you with good indications of where to focus on future sales.

How FINSYNC Can Help You Achieve Your Gross Profit Goal

One of the key aspects of achieving your desired gross profit is good cash flow management. With FINSYNC, you can analyze and forecast your cash flow for the months ahead so that you can make insightful business decisions based on real data. “The beauty of FINSYNC is that it’s obviously not just bookkeeping software,” says Mike. “Their ability to provide things like cash flow analysis and cash flow projections provides you with the visibility you need to make intelligent business decisions so that you avoid either overspending or not spending enough. It allows you to make better business calls on where you need to allocate funds moving forward into the future.” FINSYNC’s project tracking is especially helpful for marketing agencies, as it allows you to track the profitability of specific projects in real time. This can help you make adjustments as needed, and keep you on track to reach your overall gross profit goal.
Learn how FINSYNC’s all-in-one accounting solution brings together all your financial information to accurately project cash flow in real-time along with what-if scenarios to help you plan for your company's future. By FINSYNC Meet Sarah. She runs a small marketing agency with two employees in her home town of Smallville. The total workload fluctuates a lot, so she relies on a few trusted freelancers from time to time.  Despite turning a profit every year, Sarah still experiences periods of cash shortages, which prevent her from hiring more employees. Even when she sets some money aside, it’s rarely enough.  Does this sound familiar? If the answer is yes, your business would benefit from cash flow forecasting. 

Benefits of Cash Flow Forecasting

A cash flow statement provides a realistic picture of your business’ income and expenses. Forecasting can: 
  •     Help you understand how various scenarios will impact the future of the business. Including hiring, big purchases, or an increase in production.
  •     Highlight customers that consistently pay invoices late. This can help figure out if you need to change your due dates, or negotiate different payment terms with your vendors.
  •     Predict and plan for cash shortages and surplus cash.
  •     Prove your repayment ability to a lender.
In Sarah’s case, a cash flow projection might uncover that some of her clients are perpetually late with payments. Not making a cash flow projection can, in fact, put your business at risk of failing. Around 82% of small businesses fail due to poor cash flow management and a lack of understanding how cash flow impacts their business.

Why Small Businesses Struggle to Project Cash Flow

Cash flow forecasting is time-consuming and often manual work. In order to put together a cash flow projection, you need to gather copies of invoices, paper and electronic bills from all vendors, payments made with a credit card, salaries, taxes, etc. Even if you’re working with some sort of software, this process requires manual input. If you’re working with a spreadsheet, all of this data needs to be inputted manually. The biggest drawback of using a spreadsheet is the need to update it regularly. Every time Sarah wants an update of current cash flow, she needs to add the new numbers and remove the old ones Instead of doing this work manually, you can save significant time and improve accuracy by relying on software like FINSYNC to do it for you. 

How FINSYNC Projects Cash Flow

FINSYNC offers a real-time update of how your business is doing. The platform gathers financial information from your bank, payroll, accounting, invoicing, and accounts receivable, and updates the cash flow projections daily for the month ahead.   You start by connecting all your bank accounts through FINSYNC. Based on this data, the platform sets a starting balance for any given month. To calculate the money coming in, FINSYNC pulls information from invoices and deposits made in your bank. Overdue invoices are not included in the forecast. The money that goes out is retrieved automatically from payroll and the accounts receivable inbox in your FINSYNC dashboard. Since you can also pay your bills directly from the FINSYNC dashboard, this is also accounted for in the cash flow predictions. [caption id="attachment_6361" align="alignleft" width="300"]A business seeing tightening cash flow models the impact of a line of credit Here is a view of a business experiencing tightening cash flow as well as the impact of a line of credit all in one place within the FINSYNC platform.[/caption] FINSYNC allows you to get a detailed overview of all your payments in one place. All bills and invoices from vendors have a status, so you know if they’ve been paid or not. They’re broken down by these two categories regardless of their due dates. The data displayed in the graph provides a visual view of the month ahead. It makes it easier to see potential cash flow problems so you can make any necessary adjustments. In addition to a monthly, graphical view of your data that helps you plan for the overall health of your business, you can also benefit from a daily calendar view. Being able to drill down specifically to the day will help you identify specific dates where you might run into cash flow issues. Often with vendor payments and payroll, a week or even a day can make a big difference.

Account for What-If Scenarios

For a cash flow statement to be valuable, it needs to be based on accurate numbers. Unfortunately, many small business owners predict their future sales incorrectly. They also fail to account for the financial impact of big decisions. For example, hiring, investment in equipment, or taking out a loan.  To help with these issues, FINSYNC has a “what if” feature. Instead of guessing what the impact of a major decision will be, Sarah can create potential cash in or cash out situations to see how it will hypothetically impact future cash flow. She can even make multiple “what-if scenarios” and toggle them on and off to view their individual impacts. You can customize each “what if scenario” to occur on certain dates, repeat each week or month, or simply set it as a one-time expense or income. This can help you visualize big purchases along with the impact of hiring new employees, or opening a line of credit. With this feature, you can also quickly and easily see what a bad month would look like for you. That way you can plan accordingly several months ahead.  Cash flow forecasting is an indispensable tool for running a successful business, even if you’re doing it alone. FINSYNC’s all-in-one platform offers many useful features, such as payroll, which is a huge component of cash flow projection on the expense side. With FINSYNC, payroll is automatically factored into cash flow projections along with other expenses and income through invoices. The best part is every time you create a new invoice or bill or add someone to payroll, it gets included in your cash flow projection automatically. Are you ready for a more strategic approach to your business? Start today.
How consolidating control of payments, invoicing, payroll and other financial tasks can optimize your business to save you time and money. By FINSYNC  One of the first realizations that strike entrepreneurs when they set out on their own is just how much multitasking is required to operate their small business day to day.   You have to explore ways to grow your revenue, maintain existing customer relationships, and ensure you’re managing costs. All while staying on top of payments, invoicing and myriad other key accounting tasks.   That's a tall order, especially when you’re running the show alone or with a handful of employees. Often the technology businesses rely upon to help streamline their accounting tasks end up complicating matters.  It can be time consuming enough to learn how to navigate a typical bookkeeping program, never mind when you add on other software for making payments, managing payroll and invoicing. Pretty soon, the time it takes to switch between multiple interfaces just to get a handle on whether you have enough cash flow to cover expenses at the end of the month begins to add up. Even the most skilled multitaskers will be hard-pressed to keep up with that approach. Of course, there's a far better option. Consolidating all of your financial accounts and tasks within a single software operating system. That's what you get with FINSYNC's integrated accounting and cash flow management platform.   Centralizing control of your financial tasks within a single platform will optimize a large swath of your responsibilities. It will save you time and money. All while providing you with insights into how you can grow your business that would be far harder to come by with a decentralized accounting approach.  

One-Stop Accounts Management 

Streamlining financial tasks begins with consolidating your various accounts under one software platform. Once all your accounts are linked, essentially talking to each other, you can automate a variety of back-office tasks, including making payments, sending out and tracking invoices, and even processing payroll.    This means you can quickly confirm whether a bill was paid or a customer received an invoice. A system like FINSYNC also automatically sends out invoices and email reminders to customers whenever their payment is past due.   Every transaction, regardless of which bank or credit card account, is easily accessible. No more bouncing around from one application to the next and struggling to keep passwords straight.   More importantly, the integration of your accounts makes it possible to set your bills to be paid automatically. This consolidated approach also generates an accurate, electronic data trail of all your payouts and accounts receivable.   Payroll is another area that can be greatly optimized by linking it to your other accounts within a platform like FINSYNC. An employee time-tracking feature can slash your processing time and minimize mistakes when calculating payroll. A time-tracking application can also eliminate the data entry associated with physical methods of keeping tabs on employee work hours, and ensures that your payroll is in compliance with employee tax withholding requirements. This not only saves you time — and stress — it saves you money. Consider that FINSYNC customers, on average, save 30% on payroll alone.  

A Consolidated, Comprehensive View  

Perhaps the most important benefit of combining all your back-office tasks under a single platform is that you gain a real-time, accurate view of your business' financial condition. This enables you to optimize how you manage your cash flow. You can spot potential funding shortfalls well in advance.   Need to make sure you have enough cash coming in to cover a big expense later in the quarter? FINSYNC enables you to set the time schedule for your customer invoices. This is so that you can allow enough time to increase the likelihood that revenue will be coming in on time to help cover your costs.   Consolidating your accounts within FINSYNC's platform also helps make it easier to keep your company in the black. With built-in time and expense monitoring and tools that can more accurately deliver project cost estimates. You can even track expenses and profitability on a task, phase and project basis.  

More Payment Options 

A platform like FINSYNC can also help you manage your cash flow. By giving you the option of using credit cards to cover costs for goods or services even if the recipient doesn't have a merchant account.   The platform allows you to send and receive payments with full remittance details with an email address alone. That means you can send anyone a payment using a credit card. Your customers or vendors won't ever see your credit card details. If you use a credit card that offers cash back or other rewards, you'll accrue rewards any time you send a payment using the card.   The ability to use credit for all types of payments can come in handy. Especially when you're trying to preserve cash.  You have a lot of important tasks to juggle as a small business owner. Why struggle with tasks that can be handled more efficiently with a simplified, all-in-one approach? See how FINSYNC can help you consolidate your efforts with a free 7-day trial.
A bit of planning and foresight can help your small business avoid crippling cash flow problems. No matter what challenges you come up against.   By FINSYNC Few small businesses get going, much less succeed, without hard work, tenacity and tolerance for risk. Having a good idea for delivering a product or service better than the competition doesn't hurt, either. None of those attributes matter much, however, if your business is chronically low on cash.  This is the reality for many small businesses, and it can be their undoing. Nearly a third of small businesses fail because they run out of money, according to an analysis by business intelligence company CB Insights.   Of course, there is no shortage of ways businesses can end up in dire financial straits. Sometimes the economy hits a downturn and projected sales dry up. Or there's a problem with a key supplier that spoils what would have been a big payday.   Even so, forward-thinking entrepreneurs know there are ways to put their business on the best footing to ride out the inevitable swings. All too often, the source of small business cash flow problems are within your control. Have you set up your accounts payable and accounts receivable to maximize your cash flow? Are you able to accurately forecast your cash needs six months or a year from now?   And are you certain you're doing all you can to ensure your company can withstand a big, unexpected and unavoidable expense?  Here are three common reasons small businesses run out of cash — and what you can do to avoid a similar fate.  

Badly Timed Invoicing  

One of the first places to eliminate potential cash flow issues is in your business's own back-office operations. This is where poor planning in how you set up your billing and other accounting practices can have costly ripple effects months or even years down the road.   One big red flag is when businesses fail to coordinate their accounts payable and accounts receivable. This comes down to sending out invoices to your customers on a deliberate schedule that takes into account when you will need to meet your most pressing cash needs, like covering payroll, paying your bills, or other key expenses.   This isn't likely to work well if you're still sending out invoices by mail. Even sending email invoices can be hit-or-miss, if you opt to do it yourself or rely on an employee. There's always going to be some distraction that ends up delaying when those invoices go out. And why risk that, when there's technology you can use to ensure it gets done on time, every time?   FINSYNC allows users to automate bill payments and invoicing, along with payroll processing and other back-office tasks. Sending out invoices automatically increases the likelihood that you'll be paid sooner. This reduces the possibility that you’ll come up short on funds to cover your business expenses.  

Lack of Foresight  

A big part of managing cash flow is having good insight into what it will take to financially navigate through the predictable ups and downs of your business cycle. For example, retailers need to ensure they have the funding to place orders for goods in the spring so that they have fully stocked shelves in time for back-to-school sales in the fall. Also so they can hire more workers for the holiday shopping season in November and December.   Your business has its own seasonal patterns when demand — and the potential for more revenue — is perhaps strongest. And, conversely, when sales are likely to slow. By syncing up all your financial accounts, FINSYNC can help you better manage how you plan for these cash flow swings. FINSYNC’s accounting and cash flow management platform provides you with an accurate, comprehensive view of your company's finances, making it easy to get quick answers on questions such as which bills are coming up, the status of accounts receivable, and where you stand on covering payroll.   This data is key to forecasting your cash flow needs. That way you can take steps to avoid any funding problems well in advance. Features like built-in time and expense monitoring and employee time tracking can also make it easier for you to manage your cash flow.  

Things Outside Your Control

Sometimes things happen that are well beyond your control in business. All you can do is hope that you've done enough to ride out the turbulence. This is what many businesses had to do more than a decade ago, when a booming economy, housing and stock market skidded, triggering the biggest economic slump since the Great Depression.   Many businesses didn't make it, especially as the credit markets dried up. Those that survived learned that certain strategies can help. For example, building up cash reserves to cushion against times when sales slow. Lining up capital before you need it can be key. Especially during a severe economic downturn that could lead to banks pulling back on lending.  Even if you've been turned down in the past for a business loan from a traditional bank. There are more options than ever for small businesses to obtain the financing they need.   The pullback in traditional lending after the 2008 financial crisis helped give rise to online lending companies that use technology to speed up the loan application process and broaden how they gauge a borrower's creditworthiness, including looking beyond a business' collateral. That's led alternative lenders to become a key source of financing for small businesses in recent years.   FINSYNC’s Lending Network matches applications from small businesses with a variety of lenders in a matter of minutes, making it easy for you to choose who has the best option for your business.   Finding other ways to extend your cash flow is also a good strategy when funding needs increase suddenly. FINSYNC Pay will allow you to use your credit cards to cover costs that you would normally only be able to pay with cash, such as your rent, freeing up your cash for other needs.   While there are many trajectories for growth, successful business owners know investing in sound financial management will help get them there faster. No matter the challenges along the way. Try FINSYNC for free to see how the platform can help you easily improve your cash flow management and avoid those dreaded dips into the red.
From saving on supply costs to renegotiating your rent, these simple steps can help you reduce small business expenses and build up your bottom line.  By FINSYNC What small business couldn’t use a bit more cushion in their bank account? Improving your cash flow isn’t just about increasing sales. There are several small steps you can take to lower your business expenses and keep more cash in your account.  Chances are, you don’t even realize all of the places where your business could save a few bucks, and even the smallest changes add up over time. Start considering every dollar that goes out, and get ready to find money you never even knew you had. 

Here are 10 ways you can reduce your business expenses to boost your cash flow: 

  1. Minimize Nonessentials

Do your employees really need fresh bagels every Friday? Perhaps it’s time to treat them once a month instead? Job stability is way more important to your team than a bit of breakfast, especially in tight times. From unnecessary maintenance to little extras here and there that your business would probably never even miss, chances are there are a lot of nonessential expenses that you can cut. This is also an excellent time to take stock of old inventory and unused equipment. Let’s be honest, does that dusty old cappuccino maker spark joy? Be brutal, Marie Kondo style. If you no longer need it, or simply can’t use it anymore, sell it for a quick and easy influx of cash. 
  1. Review Recurring Expenses

Take a hard look at all recurring expenses to see where you can trim the fat. Even seemingly minor things can add up. Are you still paying for insurance you don’t need? Services you no longer use? Outdated subscriptions? And do you really need that landline? You know what to do with all of those unnecessary expenses.
  1. Lower Supply Costs

If your business relies on wholesale supplies, finding the best prices can dramatically impact your cash flow. Have you been loyal to the same suppliers since you started your business? It may be time to shop around a bit and see if there are any better deals out there. Did you find a better price? You can always go back to your current supplier and see if they’ll match it. If not, it could be time to move on. Keep tabs on sales to stretch your dollar even more.
  1. Hire Contractors

Paying a full-time employee can be difficult for a small business, and the hiring process is often arduous and time-consuming. More and more, contractors are stepping in to offer a cost-effective solution to fill an employment gap. These days, freelance networks make it easier than ever to find the help you need, exactly when you need it.  Getting financial expertise can be especially challenging for a small business. Hiring a full-time bookkeeper or accountant is cost prohibitive, but the insight these financial professionals provide can often save you money in the long run. With FINSYNC’s Network, you can get matched with a financial professional for help with bookkeeping, accounting, human capital management, financial analysis and corporate strategy.
  1. Downsize or Sublet

Whether you have office space, retail space, or both, paying for the place where you do business can be one of the biggest expenses small businesses face. If you have a lot of unused space, consider downsizing to reduce your monthly rent costs. You could also invite another small business or independent contractor to share your space in return for covering a portion of your rent. Utilizing a co-working space is another budget-friendly option.
  1. Work From Home

If you don’t actually need physical office space, consider becoming a home-based business. Employees generally appreciate the freedom that telecommuting provides, and it’s easy to stay connected with today’s technology, from video conferencing to cloud sharing. You can still get your local team together for weekly in-person meetings, even if it’s just a standing lunch meeting.
  1. Negotiate Rent

If having a physical space is crucial to your business, and you’re happy where you are, why not try to negotiate a lower rent? You could offer to sign a longer-term lease to make it worthwhile for your landlord, especially in a favorable rental market. Even if you don’t really want to relocate, it pays to shop around for comparable spaces so you can bring any lower rental rates to your landlord’s attention.
  1. Consolidate Your Online Tools

How many subscriptions and software packages do you pay for to manage payroll, track cash flow, invoice clients and track time? Relying on a single platform to handle all of your back-office tasks not only makes for a more efficient workflow, it can save you a lot of money.  A tool like FINSYNC offers a complete solution for payments, invoicing, bill pay, payroll, accounting, financing, cash flow management and services. Bonus: Having all of your financial data in the cloud is a great way to consolidate, always have the latest software updates, and save on IT services like data storage or an on-site server.
  1. Barter

Bartering is one of the oldest ways in the books to save money on business expenses. Do you have excess inventory that’s collecting dust, or specialized skills to offer during a slow month? Think of what your business needs, and make an even exchange without cash ever changing hands. For example, a design firm that’s looking for a place to hold events could offer to update an event space’s website in exchange for use of the space. A restaurant could offer to trade some excess produce for coffee from a local roaster and café. Find service-to-service bartering opportunities on Craigslist’s bartering section, or a fee-based online bartering exchange.
  1. Go Green

There are several small steps you can take to reduce your business expenses while doing something good for the environment. Let’s start with energy. Save on heat and air conditioning costs with a smart thermostat. You can also easily reduce your power consumption by turning off and unplugging computers and equipment when you leave for the day.  And what about all that paper? Print less and share documents online more to reduce both paper and printing costs. These things add up. While we’re at it, are you still sending out paper invoices and cutting checks manually? What about paying for postage to send checks through snail mail? Automate your invoicing and make online payments to minimize these unnecessary expenses.  Focusing on even a few of these 10 ideas to reduce expenses can have a dramatic impact on your cash flow. Stash your savings away in a business emergency fund, or pour the money right back into your business to take advantage of a growth opportunity.
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Payments
Bill Pay
Invoicing
Accounting
Payroll
Expense Reimbursement
Time Clock
Time Sheets
Projects
Cash Flow Management