As a small business owner, you’re familiar with how unpredictable running your business can be. Whether it’s an unexpected expense, a drop in revenue or an unforeseen market shift, you must always be prepared. While we can’t control these external factors, we can be prepared for them.
The Importance of a Safety Net
One of the most important things you can do for your small business is establish a safety net, more than likely in the form of a line of credit. This can be through your home equity, a brokerage account, a bank loan, or even credit cards with high limits. The key is to not use these credit lines, but to have them available as a backup if you ever need them.
Having access to a substantial line of credit can reduce the stress of financial uncertainty and provide a cushion that allows you to continue operating as normal, even when cash flow may be tight.
Free Working Capital Strategies
Outside of a line of credit, there are plenty of other strategies you can use to generate free working capital within your business. Having practices in place to gain free working capital contribute to a healthier cash flow and allow your business to thrive, even in challenging times. Strategies like this are important for all small business owners, but especially new business owners who may not fully understand their impact.
Balancing Cash Flow with Employee Expectations
Payroll is a common area where business owners can optimize their cash flow. Direct deposit is a convenient option for your employees, but it also means that a large sum of money leaves your account all at once. Issuing physical checks instead allows you to maintain a bit more liquidity. Even though it may not be a popular choice amongst your employees, it’s an option that should be considered, at least in the early stages of your business. Once you are more stable, transitioning to direct deposit can be a nice gesture to your team.
Reach out to our team today
Being prepared for financial uncertainties is crucial as a small business owner. Establishing a robust line of credit and implementing free working capital strategies can provide you with the safety net you need to get through tough times. By taking these steps, you can reduce stress, make better decisions, and ensure the long-term success of your business. Reach out to our team today to learn more about how financial planning can benefit your business.
