Understanding cash flow is absolutely critical to the long-term health of your business.
Most channel partners know that cash flow is critical to the success of their businesses, but many partners have a shaky understanding of what to measure, how to measure it, and how to build a cash flow management strategy.
And it’s a pretty easy thing to get a handle on. At some point in the future, growth is going to happen to your business, and you’ll need to know how to manage cash flow.
A poor understanding of cash flow can lead to issues, like not having enough money in the bank to pay employees, hire contractors, or to ensure the check to the electric company won’t bounce forcing them to shut off your lights.
Most importantly, it can slow your growth. If you understand your cash flow, you can effectively control your growth and protect your both your business and your sanity.
So here’s five easy steps to developing a cash flow strategy.
1) Hire an Accountant
If you already have an accountant, skip to step two.
The rest of you, stay with us.
You want someone who understands the nuances of cash flow and can dig into the weeds of your finances. When looking for a CPA, ask them if they understand cash flow, and if they’re worth their salt, they will be.
Some of the questions you should ask should be like this:
- What do you understand about cash flow?
- Will you work to track my incoming and outcoming cash flow?
- Can you help me develop a plan to manage my company’s finances?
2) Do a financial analysis
Now that you’ve got your accountant have them look over all your finances and create a cash flow report.
They should review every part of your money situation, and leave no invoice unexamined.
Once they’ve finished this, now it’s time to meet.
3) Evaluate with CPA
Once a month (or more frequently if need be), you two should sit down and check the pulse of your cash flow.
It might be overwhelming at first, but if you’re CPA is good at their job they should be able to walk you through the status of your cash flow.
4) Work with a Peer Group
You’re not the only business that’s struggled with cash flow, and you avoid common money pitfalls when you surround yourself with good advice.
Join with other MSPs and learn from their mistakes and successes.
Some of the best groups to be a part of are:
5) Create a cash flow strategy
Once you’ve done all the above, it’s time to implement all the steps and develop a plan to manage your cash flow.
From this point, you and your CPA can sit down and come up with a plan of attack to handle to negative cash flow and bring your business back to being cash flow positive.
So, if you were struggling to manage your cash flow, you have a game plan. Talk to your CPA, meet and develop a strategy to increase your incoming funds. Usually, it’s as simple as lowering your A/R.
Ready to improve your company’s cash flow situation?
Share some information here regarding your business’s managed services and accounting integrations, and take control of your cash flow through improving your receivables with an automated tool like ConnectBooster.