Creative Cashflow Planning for Business and Life

Creative Cashflow Planning for Business and Life

All business people are in the business of making money.  Regardless of your niche or area of specialization, businesses run on money.  Regardless of the age or stage of your business, a very close look needs to be taken at where your money is going and what it is doing for your business.  Cashflow planning is not so much about how much money you are making.  It is, more appropriately, about making the most of your money, using it in specific, measurable ways and ensuring that it’s use converts to more business and more revenue.

Basic cashflow planning involves some key concepts:

Knowing Your Numbers: it is imperative that you have a firm handle of how much!  How much is coming in, going out, being reinvested, wasted, lost, etc.  By knowing how much, you as a business owner can quantify the impact of your money in real numbers.  Not guesses or feelings but facts.  Not only is this integral to your day to day operations, but it shows positively to any external investors when you are looking to expand your business and must present the true financial picture of your profitable business.

Assigning tasks: every penny that you make, whether as revenue or capital investments, must have a task, a job description.  Money that has no defined work to do is wasted, under- or over-estimated and lost.  Its value is undermined and it’s potential never materialises. Consider your money as your first employee.  Having a business cashflow plan or budget helps you to put your money to work for you with specific tasks outlined, like marketing, expansion, capital costs like rent and office equipment.  Even savings need to be tasked because you need to be saving for something – like future expansion, sinking fund, real estate purchases, etc.

Measuring ROI:  every penny that is used in your business should have the ultimate goal of creating profits for your business.  That makes it an investment.  Every investment that is made is done with the expectation of a profit or return. So, it stands to reason, that every penny expensed in your business must show a definite return on investment.  That investment can be measured in cash (e.g. more business revenues) or in kind (goodwill, community impact, etc.).  Regardless of the way in which your return is measured, it must be a return that is of value to your business. 

Reviewing and Adjusting: set it and forget it is not a mantra to apply to your cashflow plans.  There is a natural ebb and flow to business cycles and your cashflow plans must both anticipate and respond to that natural movement.  This means that your 2017 cashflow plan may not work in 2018.  It means that you must regularly re-examine the tasks you have assigned your money and adjust as your business needs change or the returns are found to be lacking.  Regular reviews are best to minimize the impact of errors and maximize the impact of good decisions.

These are basic cashflow planning principles that work in normal, average circumstances.  However, if you are looking for extraordinary results from your money, you must employ creative cashflow planning principles.  These methods will help you to overcome any capital constraints as well as get exceptional results from your business revenues.  Here are some creative cashflow concepts:

Use Percentages as Guidelines: especially in situations when there doesn’t seem to be enough money to go around, using percentages to direct your revenue is beneficial.  For example, if you know that your business thrives on marketing, then a larger percentage of your money should be directed to that.  Percentages allow you to prioritize specific expenses that are vital to the success of your business without completely ignoring other areas that need funding.

Barter With Real Money: Bartering continues to be at the foundation of how our society operates.  In entrepreneurial circles, it has become a way for small businesses to get access to required services without the need for an outlay of cash.  Consider instead the idea of bartering but using real money.  If you can find a service provider with whom you can identify a real, mutual need for each others’ service, engage each other’s services and pay each other real money.  It is true that one transaction neutralizes the other but the benefits to your business are significant.

For one thing, it ensures that there is a genuine need for the service being used to barter.  It also helps to show cashflow for your business and theirs.  Further, bartering with real money ensures that the work required to be done for success in each service is done so that no one’s services are taken for granted. It is amazing how much more seriously business is taken when real money is involved.

Plan ahead: So much money can be saved when business owners plan strategically.  Planning well ahead for expenses means that the business owner is less likely to be taken by surprise.  It also means that, with the anticipation of both regular and sporadic expenses, you can position yourself to be responsive instead of running your business from a defensive position.  Good planning also helps you to be ready for opportunities.

At times the creativity involved in creative cashflow planning means that things take a little longer to materialize however that is a great thing.  Use this extra time to plan, create foundations and to properly prepare for the growth that will result from the planning and implementation of a well thought out plan.

Creative cashflow planning is a great way for you to step outside your proverbial box to develop strategies and solutions that will help your business thrive and stand out in your sector. 

Hadriana Leo, CCS

Money Navigator at Crescendo Financial

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