While it's more fun brewing beer, managing cash flow is a necessarily evil and somethiong that must be kept up on daily. Here are 5 simple, yet highly effecitve, craft brewery cash flow management tips to BOOST revenue.
- Determine Your Break Even Point - You should know when your brewery will become profitable, not because it will affect your cash flow, because it won’t, but because it gives you an early goal to strive for and a ready-made target for projecting future cash flow. Negative cash flow and negative profits make for a grim combination. Focus your efforts on managing your cash flow with an eye toward reaching that moment when you realize your first profits.
- Focus on Cash Flow Management, Not Profits - This may sound contradictory to #1, but it’s not. Use your break even point as a benchmark. After you reach break even and your brewery is profitable, you still need to manage your cash flow, of course. You have reached another stage of your brewery’s life.
- Maintain Some Cash Reserves - You will have cash shortfalls. Your brewery’s very survival may depend on how you maneuver through those shortfalls. If you start with some cash in your bank account, it will be easier to focus on cash flow and you won’t stress about the shortfall.
- Know Your Debt Level - When assessing how to fund growth, it's essential to calculate how much debt you're already carrying, and your comfort level adding to that debt. If you have sizable debt, additional borrowing could have a negative impact on your credit rating, which is never a good position for a small business. And your ability to secure a loan and get favorable terms will be partly dependent on existing debt as well as other elements of your financial and business profile. If you're carrying a manageable amount of debt and can secure a loan or line of credit at competitive rates, then credit may be the best option. However, if your debt level makes you or your lender uncomfortable, then perhaps establishing the discipline of using cash to methodically fund growth of your business could make the most sense.
- Collect Receivables ASAP - Keep net 30 and net 60 terms in contracts to a minimum. If necessary, delegate the task of keeping an eye on receivables and contacting customers periodically to collect payment to a trustworthy, persistent member of your team.
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