Cash flow is the backbone of all enterprises and, not unsurprisingly, is a primary concern for many company owners. To make informed strategic business decisions, they rely largely on cash flow figures and the expertise of their financial team. As a result, cash flow statements must be correct, but more importantly, cash flow forecasts must be correct to avoid running out of cash.
Charging too little for your services.
Everyone’s looking to save a buck, even your customers. However, your business will fail if you charge too little for your goods or service. Raising prices can be scary, and you might lose some customers.
Cash-flow management is one of many exciting aspects of having your own business. It can take some time. Examining every spending and revenue source can be time-consuming. But it’s critical. Cash is what keeps your business running, and you must maintain it flowing in and out at the proper rate.
Be Ruthlessly honest
There is a delicate line between ambition and reality. It is not uncommon for business owners to be overly enthusiastic when projecting sales and then confront a liquidity constraint later. So it’s critical to repeat your basic assumptions frequently and to question if you’re being objective when estimating how much money will come in and when it will arrive.
Overspending at the startup period of a business
When most new firms start, there are a lot of expenses to cover up front, but are they all necessary? Will each penny you spend to have a real impact? Create a reasonable budget and stick to it. Examine, expect, and adjust regularly.
Failure to maintain a cash flow forecast
To understand when cashflow constraints may occur, every business should have an up-to-date cashflow forecast outlining all expenses and income for the next 18 months. Otherwise, businesses risk spending money today that will be needed later to pay providers or revenues. Use artificial intelligence-powered smart tools to collect and match incoming payment information from emails, bank records, and client portals to the relevant bills. Check out our AI-based Cash Application Software to see how an AI-based remittance matching tool works. We allow for 95% straight-through cash posting and a 100% reduction in lockbox data capture fees.
Improve Your Cash Flow Management
First, watch for negative cash flow or cash from operations. This could imply that the company relies on finance or asset sales to fund its operations, which is not a long-term stance. An operating cash flow ratio of less than 1.0 is another red flag to be aware of. This could indicate the company is not earning enough cash to pay its debts.
Keep an eye out for major changes in cash flow from one period to the next and understand how they relate to changes in your cash flow, income statement and balance sheets.
Working with Panterra Finance
Managing finances can be a daunting task. However, by working with a fractional CFO, companies can gain access to the expert financial guidance and support they need to succeed. Whether it’s financial strategy development, financial reporting and analysis, cash flow management, cost management, or fundraising and investor relations, a fractional CFO can provide valuable support across various financial disciplines. By partnering with a fractional CFO, businesses can position themselves for long-term success and achieve their strategic objectives.
Sam McQuade is the owner here at Panterra Finance. Sam has successfully scaled his decades-old ideas into an innovative full-service Financial Partner Solution for incubators, startups, and emerging business concepts, as well as well-established international companies, corporations and organizations with the introduction of Panterra Finance. During pivotal transitions, the Panterra Finance professional executive team members are equipped to provide an industry-leading concept of an on-demand Fractional CFO. In disrupting the traditional contracted title of CFO, Panterra Finance innovatively offers all its clients thought leadership based on international financial market experiences. Panterra Finance provides a unified global approach to businesses in the Americas, Europe, Asia, and Africa.
The Fractional CFO and Interim CFO experiences gained by the executives assigned to these positions throughout Panterra Finance offer them a broad perspective of the dynamic changes in international markets. The part-time CFO executives at Panterra Finance have access to worldwide teams that are proficient in and have initiated innovative strategies in projects centered on Defi, Blockchain, Bitcoin, Ethereum, Crypto, and Tokenization services.
If you feel your business could benefit from Fractional CFO services, we invite you to book a call by clicking the below button. It could transform your business.