How do small businesses track cash flow accurately?

[chickpeafilae]

I run a small business and find cash flow harder to manage than sales. Expenses come unpredictably, and forecasting feels unreliable. What tools or habits have helped you maintain clarity?

[androo]

Cash flow can be a killer if not managed.  My first tip is, if you can afford it, get a good accountant to help.  Second would be to use a good accounting software - Xero, Quickbooks, MYOB, etc. 

What expenses are unpredictable? The majority should be known - rent, insurance, wages, etc. 

Stock management is critical, don't hold less or more than you need. So if you sell 10 thingies a week, and restock monthly, then you need around 50 thingies on day 1 and then a reorder every 3-4 weeks. If you have 100 on the shelf you tie up cash, and having fewer loses sales. So stock management is critical.

Also critical is knowing your margins.  A certain percentage of sales is always going to go to replacing that sold stock, so don't spend it elsewhere. Then with what's left you have all the known, regular expenses. As I need to pay GST and employee taxes quarterly, that's all set aside also.  Finally, I set aside a % for the unexpected, a buffer.  

But it took me quite a while to understand and get to this point, and a few failed business attempts in the past. Seeking good advice is a good start, and you've done that here!  But find a small business accountant.

[SpecialEventBar]

following this cause SAME

[ascoach]

I keep an excel spreadsheet of what I am spending monthly.  It does take time to go through the stack of receipts, but it lets me easily see where my money is going.  I have it broken down into cost of goods, office supplies, taxes, licenses, memberships, postage, etc.  I also have a tab set up with my invoice sales that we do for larger orders and then a cost of what it took for me to complete the sale so I can easily see what we did make or not make on each sale.  

I also keep a monthly calendar that is in a place I see every day.  It has all our bills due dates on it, so I always know what is coming up each week/day.  I didn't always do this and always felt like more money was going out then coming in, but consciously being aware of it makes it easier. 

I also keep a low inventory.  I am able to get items in a short turnaround time through our suppliers, so it helps me keep my inventory overhead cost down. 

I also use the Square savings tool that automatically puts a percentage of sales into different folders.  It has made it less stressful to run payroll or purchase items because I know the money is already there.  

 A small business accountant is important to help you get started.  My community has a small college in town, and they have a small business department that has resources like this for free.  

[homeprogreen]

The only expense that could be a surprise is unplanned restocks and unforeseen emergency repairs. Everything else as far as expenses should be accounted for, those are expenses like labor, taxes, rent, insurance and utilities. 
those expenses should be accounted for in margin calculations, it’s important to ensure that you are setting your retail price with the correct margins so that you’re covering all the expenses and leaving enough profit. The Square Savings Accounts are a good option to ensure that you’re setting aside the money to cover utilities, taxes, rent etc since you can setup a bunch of different folders and have set percentages of each card swipe get automatically deposited into each folder. That should cover the vast majority of expense side of cash flow. The one that gets trickier is the income side. That’s where your use of the sales reports built into Square come into play. It helps if you have a number of years worth of sales so that you can spot trends. 1st I look at the monthly sales for a couple of years to see what months or seasons have sales been historically lower then average. Here it’s normally from the time Black Friday sales start until a couple of weeks before Christmas and then again the 3-4 weeks right before our local schools start back up. People are usually spending all of their money on the things that their kids need and only buying the bare minimum to get them thru until the next payday. Then I have the time period when people are getting their tax returns so they’re spending a lot more then normal. That’s normally the 2 weeks from the time that the IRS starts accepting returns and lasts about 5-6 weeks. Make really good money during that time frame. The next thing that I look at is the category and items sales reports. That will tell you what order and what stock level of those items that you want going into each season. I look at that before the changes in seasons so that I have time to lower stock levels on the stuff that doesn’t move well during the upcoming season and up the levels of the items that are expected to move well without having to deal with clearance sales. After a couple of years of sales you will start to spot the changes as they happen and adjust automatically