Updated: Dec 23, 2022
What’s your system for managing cash flow in your shop?
I don’t mean your bookkeeping system, like QuickBooks. I mean a cash management system that prevents you from running into the kinds of cash flow problems that cause most businesses to fail.
As a CPA and profit strategist for quilt shops, I know how important it is to have a clear cash management system in place. My three tips for managing your cash flow will help take the guesswork out of handling your finances:
● Analyze your cash flow
● Streamline your payments
● Manage your finances
If you improve your company’s cash flow, you can boost your business’s chances of success. Read on to get a nice, clear picture of how you spend your money and where your cash goes.
Analyze Your Cash Flow
First things first. Before you can optimize your cash flow, you have to understand what it is.
Simply put, cash flow is the money that flows into and out of your business every month. That’s it. This includes money you have coming in through sales, and also money that goes out through inventory costs and other expenses. So, in order to find your net income, gather all your sources of sales income and subtract all your expenses. Make sure you don’t forget any of your recurring expenses, like rent, insurance, and payroll.
It’s normal for quilt shops to have some dry spells when there isn’t as much cash coming in. You need to understand your recurring costs and normal flow of income so you can be ready to cover your expenses during those slower months.
Doing your bookkeeping regularly will help you prepare for changes in your cash flow. Using Profit First as your cash management software is the best way to fully understand your cash flow. It walks you through a series of steps to analyze where your money is going and how to make changes that will help your business grow.
Streamline Your Payments
Once you fully understand where your money goes every month, you need to make sure your payments are optimized.
It’s important to use one system that can handle all of your payments. Something like Shopify is a great option because it’s designed to help you get the most out of the money you’re bringing in, and it enables you to take payments easily and securely. Whether you’re conducting a sale at the register or through your online shop, you want those payments to be secure and in the same place.
Manage Your Finances
Analyzing your cash flow and streamlining your payments are very important, but they’re only pieces in the puzzle.
To really bring it all together, I recommend taking a look at your spending behaviors. I agree with Dave Ramsay that cash management is 20% knowledge and 80% behavior, which is a big reason why it’s so important to keep your personal and your business accounts separate. (This also makes things easier when tax season comes around.)
This is where Profit First can be your guide. Profit First monitors your spending behaviors and puts guardrails in place that help you maintain a profitable business.
To learn how to best implement a cash management system in your quilt shop, visit our website! www.curtisaccountingsolutions.com
Set Yourself Up For Success
Improve your quilt shop’s chance of success and improve your cash flow by analyzing your income and expenses, streamlining your payments, and managing your finances.