As a small business owner, getting a bill for an unexpected expense can have a significant effect on your business’s cash flow. Here are some tips you can use to deal with a surprise bill…
Establish a consistent reconciliation schedule. Knowing how much cash your business has in its bank account at any given time is a great first step in being prepared for the unexpected. For many businesses, a reconciliation of their bank accounts once a month is sufficient. However, if your business doesn’t have that many transactions, reconciling once every two or three months might work better for you.
Create a 12-month rolling forecast. A rolling forecast projects cash out for twelve months. Each new month, the prior month is dropped and another month out added. This forecast will show the ebbs and flows of cash throughout the year for your business and will help to identify times throughout the year that you’ll need more cash.
Build an emergency fund. Set money aside each month in an emergency fund that is to be used only in the case of a significant expense. You could consider setting a longer term goal of saving enough money to cover three to six months of operating expenses.
Partner with a business advisor. Even small businesses sometimes need help keeping their cash flow in line and avoiding unexpected expenses.
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