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Cash Flow Planning for Solo Professionals

(@Anonymous)
New Member

You've heard it a million times - cash flow can make or break a business. Lack of cash flow planning is the reason why many businesses fail. In fact, many PROFITABLE businesses fail because of cash flow issues. Without adequate cash flow, you can't pay your bills and you can't make plans for your business.

So... what is cash flow planning? Cash flow planning is projecting your future cash inflows from sales, services, and loans, and comparing them to your future cash flow needs (suppliers, salaries/wages, loan payments, taxes, etc.). The difference between the two is your net cash flow.

Why is cash flow planning so important? Cash flow planning can help you identify problems down the road, and fix them before they occur. Cash flow planning can also help you make decisions such as should I attend that conference I've wanted to attend, should I buy the new computer I've been wanting, or do I need to work extra hard this month to avoid a cash flow deficiency next month?

The first step in planning your cash flow is knowing where you spend your money! Solo entrepreneurs need to have a good grip on both their personal and business spending, as most solo entrepreneurs rely on their business income to meet personal finance goals (i.e., pay the bills!). So, you should track both your personal and your business spending, although I recommend that you keep them separate (that's a topic all by itself).

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Topic starter Posted : 15/02/2017 6:45 pm
(@Anonymous)
New Member

When estimating your future income, realize that some people will pay late, and account for that fact in your projection.

Charge what you're worth. Many businesses, especially service professionals, under-charge when they are first starting out. This is a great way to go out of business. Make sure you are charging what you're worth, and remember you're in business to make money, not to give your expertise away for free.

Watch your business spending. Focus on the value the item brings to your business, and avoid lavish spending (i.e., do you really need the fastest, newest computer available?).

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Topic starter Posted : 28/03/2017 5:00 pm
(@Anonymous)
New Member

Don't hire until necessary. Consider using virtual assistants or temporary employees for your professional servicing firm before hiring permanent employees.
Give incentives for early payment for products and services. On the flip side, chase down invoices the minute they're late. Charge interest or late fees to encourage timely payments.

Update your cash flow regularly. Your cash flow plan will change frequently as your business grows. You may want to update your cash flow plan weekly when you first get started, then switch to monthly once you've got a good handle on your cash flow.

Remember - whether you are a new or growing business, your cash flow projection can make the difference between success and failure.

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Topic starter Posted : 27/04/2017 2:53 am
(@Anonymous)
New Member

Brilliant ideas we have here especially what another commenter says about recording your finances.

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Posted : 30/05/2019 5:12 am
(@Anonymous)
New Member

Also, you need to be aware that you would more often than not lose money at least in the beginning and be prepared for that. Some extra cash flow at the start would be needed in order to stabilize.

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Posted : 15/12/2019 8:12 pm
(@Anonymous)
New Member

true the first few months or even probably the first year of your business, things will be really really slow. You need a little money to keep things going during this time.

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Posted : 03/07/2020 8:54 am
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