Successful Cash Flow Management

Cash management is ultimately about cash flow -- and very few small businesses are awash in cash. Even successful, growing companies are vulnerable to cash flow problems because they tend to add employees and inventory rapidly. This may quickly deplete the company coffers and lead to cash shortages.

Because having cash at the right time is so important, entrepreneurs must pay close attention to cash management.

Here are some tips for saving money and managing cash flow:

Make financial projections. Forecast both expenses and anticipated revenues for at least the coming year. This will help you predict when you're likely to have cash and when you're likely to need it. You should also maintain a cash reserve if possible.

Create contingency plans. Have several budget projections, including best case and worst case scenarios, and think about how you might respond. In the event sales don't take off as expected or there's some unforeseen problem, you'll be better prepared.

Keep a lid on spending. One of the most common problems with new businesses is the owners' tendency to spend freely. There's no need to have lavish offices or expensive furniture. Remember, you're in this for the long haul: You should try to get as much value as possible out of every transaction, whether you're leasing office space or stocking the company kitchen.

Keep inventory low. Don't stock inventory based on your fantasy of what you think you'll be selling in six months. Instead, stock only what you know you can sell in the short term.