Owning a business can be extremely rewarding.
However, it has unique challenges, particularly when it comes to cash flow management due to the lumpy, unpredictable nature of revenues in any industry.
Business owners employing poor cash flow management practices often find themselves trapped in an unending cycle of feast or famine. However, this problem is not without a solution and can easily be addressed using financial management tools like Dryrun.
So, what exactly is Dryrun? And how can you use it to better manage your business finances and steer growth? In this guide, we'll answer all these questions and provide valuable insights into why managing cash flow for your agency is critical.
Cash Flow Management and What It Means for Your Business
As a business owner, it's vital to properly manage money that comes in and out of your business. Maintaining a positive cash flow means that your company is in good financial health and that there is sufficient cash to meet its short-term obligations.
Effective cash flow management means understanding and optimizing your organization's cash flow. As expected, having more cash outflows than inflows can breed several challenges for your agency. For example, you might be operating a new advertising agency that has been struggling to compete with established rivals.
Between your lead generation, sales and marketing, and customer outreach campaigns, you may find that your business is spending more than it is earning. Managing your cash flow will give you accurate figures of your cash balances, so you can control your spending on advertisements.
Better still, effective cash flow management will not only give you insights into how your business is performing financially, it will also enable you to make data-driven decisions.
Once you start making data-driven decisions, your business becomes better placed to grow into new markets, minimize the amount of debt, and foster growth. But to reach this level, you may have to eschew financial statements in favor of cash flow statements.
The Limitations of Traditional Financial Statements
Many business owners still rely on traditional financial statements to help determine the financial health of their companies. However, the problem with conventional financial accounting methods is that they don't give the actual representation of a company's financial position.
These statements only provide a snapshot of a company's financial position at a given time, which means they do not accurately depict its cash flow. This can be a major problem for any business owner, as businesses are often marred by unpredictable cash flows.
Oftentimes, you'll find agencies:
- Struggling to pay bills
- Amassing credit card debt
- Stacking up unpaid invoices
- Writing checks that bounce, or
- Struggling to take advantage of new opportunities
That's because financial statements recognize payments even before cash is received, thus giving misleading information about a company's actual cash balance. It's, therefore, essential to find better cash flow management solutions that can help overcome these challenges.
Enter Dryrun: An Instant Read on the Health of Your Company
Guy Bauer, a client of Dryrun, knows firsthand the importance of having an accurate picture of his company's cash flow.
In his business, revenue is lumpy, making it difficult to know where the company stands from one moment to the next. Dryrun has been a lifesaver for Bauer and his agency, giving him an instant read on the health of his company and the confidence to sleep at night.
Dryrun is a financial management tool that connects directly to your QuickBooks, giving you a real-time view of your cash flow. The data is unbiased and direct from your accounting software, so you always have an accurate picture of your company's financial health.
With Dryrun, you can see exactly how much cash you will have next week or two months from now and make strategic changes to your business accordingly.
The Benefits of Managing Your Cash Flow with Dryrun
Having an accurate view of your cash flow is critical for the survival of your creative business. When you know where your cash is, you can make intelligent decisions about managing it and avoid the downward spiral resulting from poor financial management.
This becomes particularly important if you're a small and medium-sized enterprise (SME) owner. According to the World Bank, small and mid-sized companies represent 90% of businesses and employ more than 50% of the global workforce.
However, most of these businesses often experience cash flow challenges, which is worsened by the fact that SMEs are less likely to access bank loans compared to large organizations. To that end, most enterprises end up relying on internal funds for operations and business expansion.
In addition, most small businesses lack access to specialized finance professionals, such as finance directors and accountants, making them susceptible to financial errors and risks. To avoid such vulnerabilities, small businesses may need to leverage financial management tools, like Dryrun, to better manage their cash flows.
Below are a few advantages of using Dryrun to manage your cash flows.
Dryrun Can Help You Meet Your Financial Obligations
With Dryrun, business owners can take control of their cash flow and steer their businesses forward even in times of "famine."
As is the case with most businesses, the amount of money that comes into a business varies from time to time. It's not uncommon for a lot of businesses to initiate a payment only to discover later that you have insufficient cash balances.
With Dryrun, you will always have an accurate figure of your cash balances, so you can meet your financial obligations on time.
Dryrun Can Help You Pursue New Opportunities
By predicting how much money you'll make in the future, you can take on less work and be less busy, allowing you to focus on the work you love or find more profitable.
With Dryrun, you can find the sweet spot of the highest rate possible that the market will bear. This can allow you to take on fewer projects, save time, and do your best work at the highest possible price. When you have more time, your company can easily take up new opportunities when they arise.
For example, let's say you are a creative agency owner and have landed a big contract with a major player. A positive cash flow balance would automatically allow you to hire extra workers or effortlessly partner with other industry professionals to get the job done.
Here's what Bauer had to say about this.
"We've found the sweet spot of the highest rate possible that the market will bear, allowing us to take on the fewest projects. Dryrun allows us to do the best work at the highest possible price, almost like a self-fulfilling cycle. If you have the capacity, your work gets better; then your fees go up as your work gets better. And then, as your fees go up, you have more capacity. It's like this spiral upward."
Dryrun Can Help You Make Better Investment Decisions
As a business owner, you probably understand the importance of using up-to-date equipment and technology. Your ability to leverage the latest tools and equipment can easily set you apart from competitors and enable you to meet your customers' demands.
With Dryrun, you will always know your cash balances. If your cash balances show surplus funds, you can invest the surplus in the right technology and foster business growth. This will allow you to continue producing at the highest level.
Dryrun Can Help You Manage Your Spending
Finally, a positive cash flow will allow you to spend on important workplace operations, including marketing, remodeling, and market research.
When you want more clients for your business, word of mouth doesn't always get the job done. At some point, you will have to invest in advertising and marketing campaigns to put your brand out there. This allows you to expand your customer base and improve profits.
Similarly, you may need to remodel your office space to accommodate incoming talent and pay for research when entering new markets or targeting new customer demographics. Your ability to perform these operations depends on the effectiveness of your cash flow management practices, which can be enhanced by working with Dryrun.
Start with Dryrun Today to Boost Your Business
Managing your cash flow is critical for the success and survival of your business.
Traditional financial statements have their limitations, but with Dryrun, you have a better view of the health of your company and the confidence to make smart decisions about how to manage your finances. Whether you're navigating tough times or striving for success, Dryrun is an invaluable tool for any business owner.
Fight 'Feast or Famine’
Model the future of your cash flow, sales and scenarios in a single source of truth, to smooth out your revenue and achieve a steady stream of income.
Spot the peaks and valleys ahead of time so that you can adjust your capacity, backfill sales, and pick and choose the best projects, generating more money with the same team.
Book your DISCOVERY CALL to learn about the Dryrun advantage or start your FREE TRIAL today!