How do you know if your cash flow is performing well? How do you measure it? Do you compare against yourself or others, or do you just guess?
Many small businesses refer to their cash flow statements in order to stay afloat. As your business progresses and your processes mature, there are cash flow goals your business can aim for. If your small business achieves the following four benchmarks, you’ll know you’ve achieved cash flow success.
1) You pay yourself a wage
For many small business owners, the success of their business takes priority over paying their own wages. In the event you do get paid, you take what you can get after your expenses are accounted for. This amount can fluctuate greatly.
If you can afford to pay yourself a standard wage the way you do your employees, you’ve got a successful cash flow. This commitment to a consistent expense in your favour shows your business has reached a stage of professionalism.
2) Large bills don’t scare you
In a successful cash flow, all expenses are accounted for in advance. You know when bills are coming and approximately how much they will be, and you even have an emergency cushion fund to protect you against extenuating circumstances.
You’ll know you’ve reached a successful cash flow when your biggest bills no longer worry you. When your bookkeeper starts to pay bills on your behalf without you even noticing, give yourself a pat on the back. You’ve created a cash flow so robust it can withstand the fluctuating finances of your business.
3) You’re saving for future growth
Is the focus of your cash flow putting out fires and immediate problems, or does it have an eye for future growth and development? If your cash flow is working with a goal such as a new employee, office, or equipment, you’ve reached cash flow success.
With a secure cash flow, you’ve got the freedom to look forward to the future and keep a constant eye on the growth and development of your business. By reducing stress, you can start to ask ‘what if?’ questions about your potential, and start dreaming about your business again.
4) You can afford owner or shareholder dividends
This final indicator is the holy grail of all cash flow goals: to have enough money coming through the business to continually pay your investors. Even if your business is no longer classified as a small business, it’s still a good goal to keep in mind.
Once you’ve achieved this milestone, your dividends can increase in size or frequency as your cash flow continues to grow. This, in turn, grows your number of shareholders, which will contribute to the growing success of your business.
Are you looking to grow your small business through a strong cash flow? Reep keeps you focused on cash flow at a high level without getting bogged down in the detail. Why not sign up for a free trial today?