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5 Cash Flow Tips to Carry Small Businesses into the New Year

AUTHOR: Kevin Jaskolka

The end of the year can seem like a cash flow management landmine for small businesses. Coming out of the holidays, you hopefully have a surplus of cash on hand. It's generally a time when you've come out of investing heavily in a busy seasonal opportunity and are sitting on the rewards of that work.

The cash available coming out of the holidays creates a great opportunity, but it also presents its fair share of challenges. In all likelihood, you probably have some hefty bills to pay, not to mention high payroll costs for seasonal staff and holiday bonuses. At the same time, you need to start thinking about how the profits generated during the holidays can carry your business through the slow months, ensuring you have the financial resources to sustain your growth over the new year. These five tips can help you navigate these situations, positioning your business to take advantage of the cash situation that often emerges in the aftermath of the holidays:

1. Analyze Historic Patterns

Looking at your past spending patterns can help you forecast expenses for the coming year and identify when you will need cash and when you are likely to generate new capital. Even if you only have basic accounting software or spreadsheets that track your budget, you can use that past data to analyze historic income and expense patterns to get a sense of the year ahead.

With this information in hand, you can more easily understand how far the cash you have on hand will get you into the new year. What's more, you can also use historic data to project normal expenses, making it easier to understand the cost and cash flow implications of any projects you may have in mind when businesses slow down due to seasonal issues.

2. Create a Project Roadmap

What big projects do you want to complete during the next year? Maybe you want to run a major local marketing initiative or ramp up your digital footprint. Perhaps you hope to upgrade your equipment. You may go into the year thinking you want this to be the year when you focus on training your staff and helping workers build new skills.

Chances are you have some combination of projects you want to pursue in the coming year, and they all come with costs. You can't begin to anticipate your cash flow needs if you don't understand what projects you want to get done. The end of the year gives you a chance to earmark parts of your holiday earnings for upcoming projects so you can continue to grow your business. This is especially true if you have a seasonal time when you're not as busy with day-to-day projects, as the slow period can be a great time to make changes and adjustments within the business.

3. Set Measurable Goals for the Coming Year

Do you hope to hire a certain number of people to your staff? Do you want to reduce debt from a large loan to below a certain threshold? Are you hoping to open a new location/launch your business in a new market? Any of these goals can be worth working toward, but it's a matter of identifying your priorities in your specific business context. You can't begin to optimize your cash flow management if you don't have a clear sense of your priorities moving forward.

4. Plan for Emergencies

Cash flow management depends on more than tracking your spending relative to your income. You must also account for the disruption caused by emergencies. Whether it's a small issue like unexpected, major repairs to a service vehicle, or a larger matter like dealing with a cybersecurity incident that compromises customer data, an emergency can have a huge impact on your capital situation. Responding to such incidents tends to be extremely expensive and unpredictable. Develop your cash flow plans accounting for potential emergencies by creating a business emergency fund, something that may require gradual saving over time.

5. Consider Your Financing Options

Traditional loans are tricky from a cash flow perspective. They give you a lot of cash at hand, but also large amounts of debt spread over an extended period of time. Throw in a couple of business credit cards and you're dealing with a lot of complexity.

Short-term small business loans from alternative lenders can change this situation. The loans are small with predetermined payback plans. Lenders like Select Funding can configure payment plans to fit your cash flow needs. For example, we can set up small daily payments of a few dollars that are automatically withdrawn from your account, minimizing negative cash flow when dealing with debt.

Lenders like Select Funding can simplify your cash management processes by giving you quick access to cash when you need it without leaving you with complex repayment programs that make handling cash flow a headache.

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