Cash Flow Planning for Solo Professionals by Business News

You?ve heard it a million times ? cash flow can make or break a business. The lack of cash flow planning is the reason why many businesses fail. In fact, many businesses unprofitable due to poor cash flow. Without adequate cash flow, you can not pay your bills and you can not make plans for your business.

So ? What is the cash flow planning? The cash flow planning is projecting future cash flows from sales, services and loans, and compare them with their future needs cash flow (suppliers, salaries and wages, loan payments, taxes, etc..) The difference between the two is the net cash flow.

Why is cash flow planning so important? The cash flow planning can help identify future problems and address them before they occur. The cash flow planning can also help you make decisions such as what should I attend the conference that I wanted to attend, I buy the new computer I wanted, or do I have to work extra hard this month to avoid the cash flow deficiency of next month?

The first step in planning your cash flow is to know where you spend your money! Only entrepreneurs need to have a good grip on their personal and business expenses, like most individual entrepreneurs based on their business income to reach personal financial goals (ie, pay the bills!). So, you should track both your personal and business expenses, but I recommend you keep them apart (which is a subject in itself).

What is the best way to keep track of your expenses? You can use pencil and paper, spreadsheets or software program. The best method for you is the method that you will actually use on a regular basis.

You must project your expenses for at least the next 12 months, so include the annual recurring costs and other. If you are experiencing a cash flow crisis, they must monitor and project cash flow on a weekly basis instead of monthly.

If you are an existing business, you can project your cash flow for next year by reviewing your spending for last year. If you are a new business, you will need to estimate your startup costs, in addition to the regular operating expenses.

Initial costs include inventory, legal fees, advertising, licensing and permits, supplies, and costs of many more that have not thought of. To investigate the startup costs you should contact your nearest Small Business Development, contact SCORE counselor, join groups of business owners like, and read as many books or articles that you can find on the subject .

To improve your cash flow, you should:

1. Complete the first 3 steps. You have to understand the cash flow planning, track your cash flow and project their expenditure needs in the future before you can improve your cash flow.

2. Create best and worst case scenarios and create appropriate responses to the two scenarios. For example, if the best is to increase sales by 50%, how to use the benefits? Will the benefits to the company by investing in new equipment, training, etc? If the worst case is a drop in sales by 50%, how will you continue to cover your monthly expenses? By planning scenarios best and worst, you are ready for any situation.

3. When estimating future income, they realize that some people pay late, and account for that fact in its projection.

4. Charge what you?re worth. Many businesses, particularly professional services fee when starting. This is a great way to get out of the business. Make sure you are charging it is worth, and remember you are in business to make money, not to give their expertise for free.

5. Watch your business spending. Focus on the value of the element contributes to your business, and avoid waste of money (ie, what you really need the fastest, newest equipment available?).

6. Do not hire until needed. Consider using virtual assistants or temporary employees before hiring permanent employees.

7. Provide incentives for prompt payment for goods and services. On the other hand, chasing invoices when you arrive late. Charge interest or late fees to encourage timely payments.

8. Update your cash flow regularly. Your cash flow plan change frequently as your business grows. You may want to update your plan weekly cash flow for the first time you start, and then switch to month once you have a good handle on your cash flow.

Remember ? if you are a new business or growth, cash flow projection can be the difference between success and failure.

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