Manage Your Small Biz Year-End Cash Flow Wisely

As the year ends, you might be reflecting on the success of your small business over the course of 2011. Looking back at numbers, growth, inventory management, and profits will allow you to determine what went right, what went wrong, and how you can compensate in the following year. Here are a couple of tips for managing your cash flow at the end of the year:

Make Predictions for the Coming Year

You can base your projections for the coming year on your high and low times during 2011 but only loosely. Why only loosely? If you received the most positive cash flow in February 2011, the coming month of February may not supply the same results. When planning ahead, always underestimate. Underestimating will allow you to propose a financial backup plan during times that do not meet the expectations set by the previous year. Additionally, planning ahead while underestimating will allow you to determine if further investments are possible in the coming year.

Limit Spending Despite Positive Flow

This concept is particularly important when your business is new. Whether your cash flow is positive or negative may determine the quality of your Christmas presents and upcoming small business investments. If your backup plan for the coming year requires a saved portion of your yearly profits, you may have to delay small investments until your profits exceed your predictions. Rushing personal financial gain can quickly wipe out the foundation that allowed you to profit in the first place. Remain miserly and protect your profits until your profits far outweigh your overhead—and until that profit has remained consistent over time. A small business will grow if you know how to distinguish smart risks from bad ones, and if you refrain from overextending yourself too soon.

The holidays are a tempting time to spend money, but reflecting on the year’s success and playing it safe will allow you to continue your success in 2012.

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