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Cash flow for small businesses — it’s something that every small business owner needs to be able to manage. But knowing how to do so can be tricky, especially if you’re just starting out with a new business. Whether you’re a solicitor, engineer, architect, or project manager, everything comes back to cash flow. To clear up some of the confusion, consider these tips. But first, don’t forget that your business will need the appropriate amount of business insurance in St. Louis.
Understanding Cash Flow From The Start
If you’re new to the business and not sure what the phrase “cash flow” means, that’s okay. While this is a complex term with complex meaning, the most basic definition is: “Cash flow is the movement of cash in and out of your business.”
With this understanding, you can start taking steps to improve cash flow for your small business. One of the most crucial steps to improve and manage your cash flow is opening a business bank account. This eliminates an intermingling of your personal and business finances and makes it easier to manage your business.
Choosing the best option for your small business can feel a bit overwhelming, but there are a few ways to ensure you make the right choice. As a rule, the best bank account for your small business should come with features to help you maximize your cash flow while minimizing your effort and time. Ideal account features to look for are:
- High-yield interest on your balances.
- Effortless integration with your chosen accounting platform.
- Immediate deposit.
- No upfront costs.
- No monthly minimums or monthly costs.
Savings Accounts Vs. Money Market Accounts
Entrusting your cash to a top-rated financial institution with excellent account features and service is the best way to keep your cash flow in check. Still, you may also be interested in learning more about whether a money market account could provide even faster cash growth.
The key differences to keep in mind when comparing high-yield savings accounts with money market accounts are:
- Like high-yield savings accounts, money market accounts offer interest rates that help you grow the amount of cash in your account.
- Unlike a savings account, you can write checks and make purchases using most money market accounts.
- While yields may be higher and faster, as Barron’s explains, so are the risks with a money market account.
Profits Vs. Cash Flow And Managing Each Efficiently
You’ve just completed a sale and taken cash from a customer. Are those funds now part of your cash flow? It may seem confusing, but The Rewards Network notes that money is not explained so simply. Profit is the revenue left after deducting the costs for running your venture, while cash flow is the amount of money flowing in and out of your business at any given time.
In terms of profitability, smaller transactions like this are not nearly as important as accrued revenue and accrued expenses — both of which must be measured over time. So while the cash can be counted in your cash flow, this may not have a direct impact on your profits.
It’s also worth noting that the strategies you use to increase profits can be entirely different from those utilized to manage and maximize cash flow. Some clever ways that other small businesses are creating more revenue include offering subscription and repeat delivery and/or creating social media stores where customers can shop with convenience.
Managing cash flow while creating profit also means paying close attention to other parts of your business. For example, forget to run payroll? We have you covered! Yes, payroll makes a huge impact on your cash flow. Getting it wrong or forgetting to run it consistently can make getting an accurate picture of your business’s financial situation difficult.
Using an app like QuickBooks Payroll allows you to pay employees on time, pay taxes electronically, and more. Automating this aspect of your business can make getting a clear picture of your profits vs. cash flow much easier.
Taxes And Cash Flow And Getting Help With Both
Know that in your cash flow statement, your small business taxes should be included in the calculations. Figuring out taxes is fundamentally important to the success of your business in more ways than one. If you make a mistake on your taxes, you could end up overpaying — or worse, underpaying and dealing with penalties.
Indeed, cash flow doesn’t have to be overly complicated for your small business. Hopefully, the links and tips in this post will help, but you can also seek out help from professionals, as well as look for comprehensive accounting and banking solutions that fit multiple business needs.
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