Ever heard about the 7 steps to control your business cash flow so you have no worries about money? If you have been working hard to reach your financial goals and feel like you are running in quicksand because you are spending more than you make and going deeper in debt, there is relief in sight! You CAN reverse that trend!
The first thing you need know is this: if you are making financial planning decisions based on how much money is in the bank right now, then you are being controlled by the money, and this usually creates a constant worry about money problems. You need to be doing the 7 steps to control your company’s cash flowto achieve your financial goals; not the other way around.
The 7 Steps of The Cash Flow Mojo® Management System
Are you ready to take charge of your financial future? Okay, then here are the seven steps of this business cash flow control system that you can use to get in control of your cash flow.
Cash Flow Management Step 1 – Budget Correctly
Accurately predict how much money is needed to operate the company this week and in the future. Figure out exactly what has been spent, by category, over the past year and then add in extra for cost of doing business increases, emergencies, legal and taxes, future expansion and that all important retirement plan. This becomes the budget, also known as the Income Planning Target.
The correct definition of budget here is: the amount of money it takes for the organization to function and to attain its goals. That is also called the “better than break-even point” and tells you the amount of income required to thrive, not just survive. This is the first step in an effective cash flow management formula.
Cash Flow Management Step 2 – Get Paid Well For What You Do
Figure out how to make the amount of income needed, and more, to do better than just break even. Review costs and your prices to maintain or increase profitability. Establish cash flow policies to insure you get paid, like not accepting checks if you get a lot of bad checks, and sending invoices to collections that are approaching 60 days past due. Remember, you’re taking charge of your financial future here.
Cash Flow Management Step 3 – Confront and Handle The Debt
Find out exactly how much you owe in past due bills, credit card debt, and loans. This takes a bit of courage to confront, but what you don’t know because you’re just not looking at it, can undermine your profit and weaken your company’s financial condition. Cut discretionary spending. Figure out a plan to start paying off the debt. (Note: for a business, spending on promotion is NOT discretionary, it is mandatory.)
Cash Flow Management Step 4 – Spend Less That You Make
Find out how much of your incoming cash flow is actually available to spend. Most business owners forget that when the money comes in, some of it is already committed. When you spend more than you brought in, the difference usually ends up on a credit card as debt. When you are working to achieve your financial goals, don’t shoot yourself in the foot. Spending more than your available cash flow can cripple your business.
Cash Flow Management Step 5 – Pay Yourself First
Set aside regular amounts of money from your weekly cash flow for emergencies, business expansion, legal defense and taxes, and savings for your long-term retirement plan. On a personal level – from every dime of your salary, always pay yourself first and put the money in savings or investments that will grow over time. You cannot rely on the government to care of you. So if you don’t pay you into a retirement plan, who will?
Cash Flow Management Step 6 – Allocate the Cash Flow to YOUR Best Financial Advantage
Portion out some of your money toward paying past-due bills, debt, current bills, and then portion out a bit for future large expenses that are difficult to pay when they come due. Careful, consistent business money management planning can greatly improve your company’s financial condition.
Cash Flow Management Step 7 – Use Your Cash Flow to Create More Income
Use any money left over in ways that increase your ability to produce more income. Why is cash flow management important to a business owner? Your cash flow is the energy and life blood of a business. It is necessary to pump it through the income producing areas to keep it running well. Everything runs smoother when cash is available.
Seems simple, right? And it is simple. This system is easily learned, and can be used to do these 7 steps to control cash flow management planning in very little time each week. It does, however, take personal discipline and commitment to achieve the goal of financial independence so you never have to worry about money again. Done correctly and consistently, the end result is always having lots of cash on hand, all bills paid, and plenty of money in reserves to finance what you really want to do with your money; not just pay bills and make your suppliers wealthy.