Menu
Pro-Profit Consulting
  • Home
  • Taxes
    • Tax Preparation and Planning
    • Filing Prior Years Returns
    • Owing the IRS Money
    • Behind on Payroll Taxes
    • PPP Loan Forgiveness Assistance
  • Services
    • Accounting Services
    • Audit and Assurance
    • Bookkeeping
    • Payroll
    • Advisory Services
    • Cash Flow Forecast
    • Consulting for QuickBooks®
    • Training for QuickBooks®
    • Cloud Accounting
  • Products
    • QuickBooks Online
    • QuickBooks Online Advanced
    • QuickBooks Desktop
    • QuickBooks Enterprise Solutions
    • QuickBooks Point of Sale
    • QuickBooks Payments
    • Xero Online
  • Industries
    • eCommerce
    • Services
    • Real Estate
    • Medical and Health Care
    • Wholesalers and Distributors
    • Retail
    • Restaurant
  • Testimonials
  • Resources
    • Resources
    • Mobile Accounting
    • Blog
    • Tax Blog
  • About
  • Contact


Close Menu
September 12, 2019

Does Your Business Have a Safety Net?

Rene Altervain Business Tips

Tweet
Share
Share
Pin

One of the most important parts of managing a business is making sure there is enough cash to keep the business going. As a business owner, you probably have a very good idea how much cash you have in the bank at any time. The smaller your business is, the more likely you are to keep a close eye on cash.

Checking your cash balance is a daily function you should be on top of. Yet there is another often-overlooked responsibility that many business owners don’t spend enough time on, and that is managing your future cash, especially in light of unplanned situations. Looking ahead helps reduce your business risk and allows you more time to correct any upcoming dip in your cash balance.

Having enough cash is akin to having a safety net for your business. It can sometimes even mean the difference between staying in business and going out of business. To plan how much you might need for your safety net, you can use a few different methodologies.

One way to plan your safety net is to prepare for the worst-case scenario. How long would your cash hold out if no revenue were to come in but all expenses kept going out? Some questions you might ask:

  • At what point will your cash run out? How many weeks or months of cash do you have?
  • Do you have a line of credit you can tap at a bank?
  • Do you have other loans or sources of cash that you can tap quickly in case of emergency?
  • What expenses could you shut down without hurting your business if you had to?

Another way to plan your safety net is to do what the average business does: acquire the amount of cash you need for two to three months’ worth of operations and keep it on hand. Alternately, you can make a plan to liquidate that much cash on a very fast basis and only put your plan in place if it’s needed.

An easy way to get these numbers is to look at your bank statements in conjunction with your average accounts receivable and accounts payable balances. If that’s all Greek to you, no worries. Feel free to contact us and we can help you figure out a safety net number that you’ll feel comfortable with and that will keep your business risk low.

Once you have a safety net in place, you’ll gain peace of mind for your business. It’s one step in an overall disaster preparedness plan that you can make for your business.

Tweet
Share
Share
Pin
Why Having a Budget Is Important Avoiding Accounts Payable Errors: What to Watch Out for

Related Posts

Business Tips, Technology

Fighting Cybersecurity Threats in Your Business

Business Tips

The Concept of Independence in Accounting

Business Development, Business Tips

Should Your Business Become Cash-Free?

Monthly Archives

Categories

  • Accounting (22)
  • Accounting Software (2)
  • Blog (1)
  • Bookkeeping (1)
  • Bookkeeping Tips (5)
  • Business Development (16)
  • Business Growth (8)
  • Business Tips (58)
  • Cool Tech Tools (12)
  • Cost-Saving Tips (2)
  • Customer Service Tips (3)
  • Decision-Making Tips (2)
  • Expense Reduction Tips (3)
  • Management Tips (8)
  • Marketing Tips (1)
  • News (2)
  • Payroll Tips (3)
  • Profitability Tips (6)
  • Tax (5)
  • Tax Resolution (1)
  • Technology (2)
  • Time Management Tips (3)
Back To Top
Pro-Profit Consulting
Copyright © 2020 Pro-Profit Consulting LLC | Site Design by Accelerator Websites

Contact Us

Tax Services, Accounting Services and Services for QuickBooks®

Pro-Profit Consulting LLC

818-645-9761 | rene@proprofitconsulting.com

P.O. Box 4182
Valley Village CA 91617-4182


Intuit, QuickBooks, and QuickBooks ProAdvisor are registered trademarks of Intuit Inc. Used with permission under the QuickBooks ProAdvisor Agreement.