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How to Protect Your Business Cash Flow In An Economic Crisis – Cash Flow Management Help

Business Cash Flow, Cash Flow Management | 0 comments

Does the current economic crisis have you worried from a business cash flow management standpoint? Are you wondering how to achieve financial security so you can protect yourcompany from any financial crisis? Here is what you need to know.

The first thing you need to understand is what the word economics means in terms of thinking about your business, and how you can use what it means to your financial advantage.

Forget what the media says about economics when they talk about the roller coaster ride of the stock market, supply and demand, inflation, banking industry mortgage defaults and the unemployment rate. Those are ‘economic characteristics’ that measure an area much larger than you can control.

What you can control is your own business economics. The definition of economics I am using is the original one; meaning “the art or science of managing a household or business.” And that is something that you, as an individual, can control to protect yourself.

There is an art to managing a business. It takes having certain skills and abilities, like organizing things so they run smoothly. There is a science of managing one too, especially in the area involving cash flow. Here is what you can do to make sure that the economics of your business are strong and stable, even though the economy of the country may be on the slippery slide to financial disaster.

Business Cash Flow Management Tip 1 – Spend Less Than You Make

Take a lesson from your past generation colleagues who made very little, but lived very well. Keep expenses down to a level below your income. The fastest road to financial disaster is spending more than you make. It’s possible to maintain your business operation while cutting optional spending, which is often just wasting money anyway. This can be done by doing something as simple as buying a new used piece of equipment instead of a brand new one.

Business Cash Flow Management Tip 2 – Pay CASH

Every time you purchase something using credit cards that you cannot pay off as soon as the statement arrives, you are committing your future earnings to the credit company. Those future earnings will be needed to pay your regular business expenses, so you end up behind the 8-Ball in what is known as the credit trap. The exception is purchasing property that increases in value and generates positive cash flow, such as investing in a commercial building that you rent to others to put more income in your pocket.

Tip: When paying with cash; negotiate a cash discount. When the economy is sliding down and credit is harder to get, the guy with the cash is king. In addition, find out how to buy wholesale instead of retail to further lower your cost.

Business Cash Flow Management Tip 3 – Make the Money BEFORE Spending It

If there is some large purchase you need to make or want to make in the future, start putting small amounts in a savings account towards that purchase and keep that up until you have the cash to pay for it.

If you need to upgrade your computer equipment, then find out what the cost will be and figure out how much you have to put away every week to have the cash the week you want to buy the equipment.

Business Cash Flow Management Tip 4 – Stash Some Cash for Emergencies

Nothing will make you sleep better at night than the knowledge you have some cash tucked away for emergencies like having to get some equipment repaired. When you have a cash cushion you can get your hands on immediately, then magically, you stop worrying about money, your attention goes back on running your business and enjoying it, and making money suddenly gets easier.

The only thing you have to fear in an economic crisis is not having some cash reserves in a savings plan you can immediately get your hands on. Did you know that more millionaires were made during the Great Depression in the United States than during any other era in our history? How did that happen? In that time, the economy crashed, the stock market crashed, inflation took prices of everything through the roof, the unemployment rate went sky high as businesses closed, and people who lost their jobs also lost their homes.

The people who had cash stashed away, particularly in the form of gold and silver, were able to buy property and whole companies (and stocks in companies) for pennies on the dollar. They ended up being millionaires because they had enough cash to weather the storm called The Great Depression.

Out of every bit of income that comes in the door, immediately carve off at least 10% and put it in a savings account that you have designated for your cash cushion. Even if you have to work extra hours and cut expenses on top of that, JUST DO IT! As the weeks roll by you’ll find you sleep better at night and walk through life with a lot more confidence knowing you have applied smart business cash flow management tactics to protect yourself from any economic crisis looming on the horizon.