| You've heard it a million times - cash
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| | counselor, join groups of similar
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| flow can make or break a business. Lack
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| | business owners, and read as many books
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| of cash flow planning is the reason why
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| | or articles you can find on the
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| many businesses fail. In fact, many
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| | subject.To improve your cash flow, you
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| PROFITABLE businesses fail because of
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| | should:1. Complete the first 3 steps.
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| cash flow issues. Without adequate cash
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| | You have to understand cash flow
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| flow, you can't pay your bills and you
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| | planning, track your cash flow, and
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| can't make plans for your business.So...
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| | project your future spending needs before
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| what is cash flow planning? Cash flow
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| | you can improve your cash flow.2. Create
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| planning is projecting your future cash
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| | best and worst case scenarios and create
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| inflows from sales, services, and loans,
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| | appropriate responses to both scenarios.
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| and comparing them to your future cash
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| | For example, if your best case scenario
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| flow needs (suppliers, salaries/wages,
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| | is to increase sales by 50%, how will you
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| loan payments, taxes, etc.). The
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| | use the profits? Will you put the
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| difference between the two is your net
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| | profits back into the company by
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| cash flow.Why is cash flow planning so
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| | investing in new equipment, training,
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| important? Cash flow planning can help
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| | etc.? If your worst case scenario is a
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| you identify problems down the road, and
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| | drop in sales by 50%, how will you
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| fix them before they occur. Cash flow
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| | continue to cover your monthly expenses?
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| planning can also help you make decisions
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| | By planning for the best and worst case
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| such as should I attend that conference
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| | scenarios, you'll be ready for any
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| I've wanted to attend, should I buy the
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| | situation.3. When estimating your future
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| new computer I've been wanting, or do I
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| | income, realize that some people will pay
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| need to work extra hard this month to
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| | late, and account for that fact in your
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| avoid a cash flow deficiency next
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| | projection.4. Charge what you're worth.
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| month?The first step in planning your
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| | Many businesses, especially service
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| cash flow is knowing where you spend your
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| | professionals, under-charge when they are
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| money! Solo entrepreneurs need to have a
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| | first starting out. This is a great way
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| good grip on both their personal and
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| | to go out of business. Make sure you are
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| business spending, as most solo
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| | charging what you're worth, and remember
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| entrepreneurs rely on their business
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| | you're in business to make money, not to
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| income to meet personal finance goals
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| | give your expertise away for free.5.
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| (i.e., pay the bills!). So, you should
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| | Watch your business spending. Focus on
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| track both your personal and your
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| | the value the item brings to your
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| business spending, although I recommend
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| | business, and avoid lavish spending
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| that you keep them separate (that's a
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| | (i.e., do you really need the fastest,
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| topic all by itself).What's the best way
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| | newest computer available?).6. Don't hire
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| to track your spending? You can use pen
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| | until necessary. Consider using virtual
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| & paper, spreadsheets or a software
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| | assistants or temporary employees before
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| program. The best method for you is the
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| | hiring permanent employees.7. Give
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| method that you will actually use on a
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| | incentives for early payment for products
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| regular basis.You should project your
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| | and services. On the flip side, chase
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| spending for at least the next 12 months
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| | down invoices the minute they're late.
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| so that you include annual and other
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| | Charge interest or late fees to encourage
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| periodic expenses. If you are
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| | timely payments.8. Update your cash flow
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| experiencing a cash flow crisis, you
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| | regularly. Your cash flow plan will
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| should track & project your cash flow on
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| | change frequently as your business grows.
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| a weekly basis, instead of monthly.If you
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| | You may want to update your cash flow
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| are an existing business, you can project
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| | plan weekly when you first get started,
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| your cash flow for the next year by
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| | then switch to monthly once you've got a
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| reviewing your expenses for last year.
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| | good handle on your cash flow.Remember -
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| If you are a new business, you will need
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| | whether you are a new or growing
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| to estimate your start up costs in
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| | business, your cash flow projection can
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| addition to regular operating
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| | make the difference between success and
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| expenses.Start up costs include
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| | failure.Kristine A. McKinley, CFP, CPA,
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| inventory, legal expenses, advertising,
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| | and founder of Beacon Financial Advisors,
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| licenses & permits, supplies, and many
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| | teaches individuals and families how to
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| more costs that you may not have thought
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| | invest and plan for retirement, college,
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| of. To research startup costs you should
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| | and other financial goals. Kristine
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| contact your local Small Business
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| | offers financial and tax planning on an
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| Development Center, contact a SCORE
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| | hourly, fee-only basis.
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