The 3 Biggest Questions I Get About Cash Flow
"One of the principles I live by is, 'Is today's dollar worth it tomorrow?' Always consider the long-term impact of your financial decisions."
Whether you are a business owner or an investor, navigating the complexities of managing and increasing your cash flow is one of the biggest topics that our clients face.
It's not as simple as doing this or that, but we do look at it from the perspective of increasing cash flow in businesses and investments and managing cash flow effectively to increase capital and regular returns.
By saying this, let's get started.
1. How Do I Increase Cash Flow in My Business?
The answer is simple, but there are multiple facets. You need to learn how to increase your sales, decrease your expenses, and manage cash flow over time.
Increasing cash flow in a business involves boosting revenue and managing expenses. Here are some strategies to consider:
Boost Sales: Focus on acquiring new clients and offering great products or services. Consider your customer's lifetime value and build out a strategy that will allow you to increase your business's customer span. Consider monthly reoccurring revenue through subscription and/or membership models.
Manage Expenses: Cut unnecessary costs and streamline operations to improve margins. Review your subscriptions. Do you need all of them? We just cut $2K in subscriptions by moving from our Keap (Confusionsoft) platform to GoHighLevel. Not only did we reduce the costs, but also gained productivity by taking 5 softwares and replacing them with just that one.
Plan for Seasonality: Understand your business cycles and plan accordingly. For instance, planning for the slow periods around Christmas in Australia and New Zealand. Ask yourself the question, do you want to work over that time or take a break. Plenty of good strategies out there to engage potential leads around the time, however, maybe you just want a break? If so, plan accordingly.
For more detailed strategies on managing business cash flow, check out the podcast session below.
2. How Do I Increase Cash Flow Through Investments?
The biggest question we get asked is, where do I start? If you need cash flow, then look for cash flow investing strategies.
Investing for cash flow requires a different approach than investing for capital gains. Here are some key points to consider:
Identify Cash Flow Assets: Look for investments that provide regular income, such as rental properties, dividend-paying stocks, or crypto opportunities that create automated returns every month/quarter.
Understand Your Needs: Determine if you need immediate cash flow to support your lifestyle or if you can reinvest earnings for growth. if so determine how much of your returns go to lifestyle and how much to building out your portfolio to ensure consistent growth.
Diversify: Spread your investments across different asset classes to balance risk and ensure steady income streams.
3. How Do I Manage Cash Flow Effectively?
Managing cash flow isn't just about increasing revenue; it's also about stabilising and organising your finances so you can handle both short-term and long-term needs.
Effective cash flow management involves several key practices:
Forecasting: Predict your future cash flow needs and plan accordingly. How much money is meant to come in and what are the outgoings?
Monitoring: Regularly (monthly at least, we do it weekly) review your cash flow statements to track income and expenses. That includes measurement against your forecast. Remember, the more often you do it, the less time it takes and the more time you have to adapt to a changing lifestyle.
Liquidity Management: Ensure you have enough liquid assets to cover immediate expenses while investing excess cash wisely.
Final Thoughts
Cash flow is the lifeblood of both businesses and investments. By understanding how to increase and manage cash flow effectively, you can ensure financial stability and growth. As Mark suggests, "Treat your investing like a business. If you're good at business, you'll become extremely good at investing if you apply the same principles."
