• Menu
  • Skip to right header navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

PlanningShop

Plan. Start. Grow.

  • Our Products
  • Instructors
  • Entrepreneurs
  • BizGear
  • Rhonda’s Blog
  • Book Rhonda
  • About PlanningShop
  • Search
  • Our Products
  • Instructors
  • Entrepreneurs
  • BizGear
  • Rhonda’s Blog
  • Book Rhonda
  • About PlanningShop
  • Search
Cash Flow

If I’m Making a Profit, Why am I Broke?

May 8, 2019 //  by Rhonda Abrams

You’ve filed your taxes, right? Or at least filed for an extension? Either way, you had to somehow come up with money to pay the IRS. Ouch! That hurt.

Here’s the good news: You run a profitable business. That’s why you owe taxes. But why was there no money in your bank account? Here’s a dirty little not-so-secret of small businesses and the self-employed: you can be profitable but not have cash.

How can that be?

In a small business, it’s not just about making money, it’s about managing your money. It’s all about “cash flow.”

So while the memory of having to come up with a chunk of cash is still fresh, let’s talk about some easy money management solutions. A few simple steps and you’ll be on your way to an excellent credit rating, a great relationship with a bank, and a good night’s sleep because you can pay your bills.

  1. Pay your bills on time every month. Notice I didn’t say pay your bills in full every month. That’s not necessarily realistic. While you don’t want to run up the interest payments you have to make, sometime you may just not be able to make the full payment. I juggled credit card payments for years when I started my business. But every month, every creditor got paid at least the minimum amount—on time.  So set up systems, such as automatic bill payments, to pay at least the minimum payment.
  2. Send out your invoices on time every month. Believe it or not, many business owners are unbelievably tardy in sending out their bills. Truthfully, I was. And I have contractors that sometimes bill me as much as six months (or more!) late. When you bill your clients late, they pay you even later. Stop it! Send your invoices immediately when someone incurs a debt, and certainly no less frequently than monthly.
  3. Talk to your vendors. Your vendors control your payment terms. They’re the ones who say whether you have 30 days or 120 days to pay. That makes a huge difference in your cash flow. Explain your business plan. Most importantly, ALWAYS take their calls, even when, especially when, you owe them money.
  4. Ask vendors if they’ll take credit cards. That not only gives you more time to pay—if you need it—but you can earn cash back or other rewards. Christina Stembel, owner of one of my favorite companies—Farmgirl Flowers—uses credit cards to grow her business. “Before starting Farmgirl Flowers I wasn’t a points person,” said Stembel. “I wasn’t even a credit card person; I’d used debit cards my whole life! But as a small business owner, cash flow management is always top of mind. With the 2% cash back I earn with my Spark Cash card from Capital One on all my business expenditures, I’m able to use those cash back rewards to reinvest into the business.  As a bootstrapped company, every decision I make has to make sense, and earning cash rewards on business expenses I’d make with or without those rewards just makes sense.”
  5. Take your banker to lunch. A good business banker can make or break a company. Mine helped save my business at least twice. Find a bank and a banker who’ll take time to talk to you, learn about your business, and understand your ups and downs. Don’t have a banker? Time to get one, and a line of credit to access money if times get tough or opportunities arise.
  6. Get a free credit report. Small businesses get credit based on the owner’s credit-worthiness. You’re entitled to one free credit report per year from each of the three major credit reporting agencies. Get it at only www.AnnualCreditReport.com (watch out for scam sites).  Clear up any inaccuracies and keep your credit clean.
  7. Go after overdue accounts, especially big ones. If you’ve provided goods or services, you deserve to be paid. Otherwise, you’re in the lending business, and you can’t afford that. Make collecting overdue invoices a continual part of your business. Don’t be shy!
  8. Limit the amount of credit you give to any one customer, even large corporations. Big companies often pay slowly, and the risk of bankruptcy of a big customer certainly challenged my business in the past. Never allow yourself to be dependent on one customer’s financial health.
  9. Set money aside. Yes, I know you just made a huge sale, and the money is burning a hole in your bank account. Don’t spend it all! In a small business, you’re going to ride the roller coaster of cash flow. It helps to be just a little bit paranoid about where your next dollar will come from.

A few simple steps and you can be both profitable and have money in the bank in your small business.


Copyright Rhonda Abrams, 2019

This article originally ran in Her Money on May 8, 2019

Share this:

  • Twitter
  • Facebook
  • LinkedIn
  • Email

Category: Solution Center, USA TodayTag: cash flow, credit, invoicing, money management, profit, rhonda abrams, small business, small business tips, Small Business Week

Previous Post: «Small Business Week Small Business Manifesto
Next Post: Handling the Summer Cash Flow Crunch Seasonal cash flow»

Primary Sidebar

Subscribe to Rhonda's Blog via Email

Instagram @rhondaabrams

Sign up for my newsletter - get small business tip Sign up for my newsletter - get small business tips and the latest info. sent straight to your inbox! Link in profile~
.
.
#smallbusiness #newsletter #smallbizguru
What’s old is new again! How to stay in front of What’s old is new again! How to stay in front of your smallbiz customers, in my latest @usatoday column. Link in profile~
.
.
#smallbusiness #customer #digitalmarketing #smallbizguru
National Doughnut Day on Friday?? Great way to sta National Doughnut Day on Friday?? Great way to start the weekend!! Enjoy, and go find yourself some doughnuts 😋 🍩 
.
.
#smallbusiness #fridayfeeling #nationaldoughnutday
#smallbusiness #tuesdaythoughts #entrepreneur #ins #smallbusiness #tuesdaythoughts #entrepreneur #inspirationalquotes
“And I’m proud to be an American, where at lea “And I’m proud to be an American, where at least I know I’m free. And I won’t forget the men who died, who gave that right to me.” - Lee Greenwood -
.
.
#memorialday #neverforget
We're heading into a long weekend! Here's to some We're heading into a long weekend! Here's to some R&R, productivity . . . whatever your small business needs~
.
.
#smallbusiness #weekend #entrepreneur #fridayfeeling
Sign up for my newsletter - get small business tip Sign up for my newsletter - get small business tips and the latest info. sent straight to your inbox! Link in profile~
.
.
#smallbusiness #tips #entrepreneur #newsletter #smallbizguru
#smallbusiness #tuesdaythoughts #inspirationalquot #smallbusiness #tuesdaythoughts #inspirationalquotes
Here's to a great week, small business owners! . . Here's to a great week, small business owners!
.
.
#smallbusiness #smallbusinessowner #mondaymotivation
My Tweets
  • Sign up for my newsletter - get small business tip Sign up for my newsletter - get small business tips and the latest info. sent straight to your inbox! Link in profile~
.
.
#smallbusiness #newsletter #smallbizguru
    What’s old is new again! How to stay in front of What’s old is new again! How to stay in front of your smallbiz customers, in my latest @usatoday column. Link in profile~
.
.
#smallbusiness #customer #digitalmarketing #smallbizguru
    National Doughnut Day on Friday?? Great way to sta National Doughnut Day on Friday?? Great way to start the weekend!! Enjoy, and go find yourself some doughnuts 😋 🍩 
.
.
#smallbusiness #fridayfeeling #nationaldoughnutday
    #smallbusiness #tuesdaythoughts #entrepreneur #ins #smallbusiness #tuesdaythoughts #entrepreneur #inspirationalquotes
    “And I’m proud to be an American, where at lea “And I’m proud to be an American, where at least I know I’m free. And I won’t forget the men who died, who gave that right to me.” - Lee Greenwood -
.
.
#memorialday #neverforget
    We're heading into a long weekend! Here's to some We're heading into a long weekend! Here's to some R&R, productivity . . . whatever your small business needs~
.
.
#smallbusiness #weekend #entrepreneur #fridayfeeling
    Sign up for my newsletter - get small business tip Sign up for my newsletter - get small business tips and the latest info. sent straight to your inbox! Link in profile~
.
.
#smallbusiness #tips #entrepreneur #newsletter #smallbizguru
  • Footer

    Our Products
    Instructor Central

    Privacy Policy
    Contact Us

    • Email
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter

    Copyright © 2023 PlanningShop · All Rights Reserved · Site design by paulinaart

    This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. ACCEPT Read More
    Privacy & Cookies Policy

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT