As promised in Cash Flow Part 1 from the beginning of January. Here is the Part 2 – The Art of Cash Flow Management. 
The art of cash flow management is mastering and knowing when, where and how your cash needs will occur. Then figuring out how you are going to meet those additional cash needs. Are you going to loan the money, or have you saved up previous profits to help you through those times. Keeping a good relationship with your banker and other creditors is a must when you are product-based entrepreneur.
Another way to have good cash flow management is to develop a cash flow projection. Smart business owners know how to develop both short term, (weekly and monthly) cash flow projections as well as long term, (annual or even 3-5 year). By using previous historical cash flow needs and combining it with current conditions and projections, you will be able to get a good grasp of how much money you need in order to grow.
Another way to master the art of cash flow management is to learn to improve your cash flow. How you may ask? Two simple ways: 1. Reduce your expenses or 2. Increase your income.
Reduce your expenses
The quickest way to improve your cash flow is by attacking your expenses. When business is good, it is easy to spend in all areas. But once you have gone through a negative cash flow crunch, you will hopefully have ingrained in your brain that it is important to run things as tight as possible.
The best way to reduce expenses is to really look at your month-to-month expenses. Are you able to call your long distance company and get better rates? Or change internet companies to cut costs on your hosting or internet connection. What about bank, can you cut costs in your monthly fees?
What about terms. Are you able to negotiate terms from suppliers that you have been using for a while? This process of expense reduction is much easier if you are already keeping a budget. You will see if there is an influx of spending in a certain area just by looking at your budget.
Increase your income
Increasing your income is another way to increase cash flow. Is there a way you can increase the cost of your product? If not, then what about getting your raw products for less. As you grow as a business, is there a way you can negotiate better prices for the raw products because your volume has increased? The internet gives you a huge advantage now as you can use it to search for products from around the world.
I have increased our income in the past by giving bonuses to customers who have ordered over a certain amount. I would take our average order amount and add another $50-$100 to come up with the bonus. By doing that, I am trying to increase our average order price.
Another way is by giving away bonus products that is tying up your cash flow by sitting in your inventory. You may not make your full margin, but when you need the cash flow, lowering your margin to increase your income will allow you to have the cash in hand to purchase the inventory that is a top seller.
The art of cash flow management is really about the planning and the juggling of the right step to take first. By running your ship “tight” and having your expenses as low as possible and your income as high as possible, you will have better cash flow to take your business to the next level.
With Love, Gratitude and Success,
Shauna Harper
The Serial Entrepreneur
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