Getting a bill for an unexpected expense can put a significant dent in your
business’s cash flow. Here are some tips your business can use to deal
with a surprise bill.
Stick to a reconciliation schedule
The best advice is to be prepared for the unexpected. Do this by knowing
how much cash you have in your bank account at any given time. This is
done by sticking to a consistent bank reconciliation schedule. Conventional
wisdom suggests reconciling your bank account with bills paid and revenue
received once a month. But if your business doesn’t have that many
transactions, you could reconcile once every two or three months. No matter
what time frame works for you, be consistent with your review!
Create a 12-month rolling forecast
This exercise projects cash out twelve months. Then each new month you
drop the prior month and add another month one year out. This type of a
forecast will reflect the ebbs and flows of cash throughout the year and
identify times that you'll need more cash so when a surprise bill shows up,
you know exactly how it will impact your ability to pay it.
Build an emergency fund
Getting surprised with an unexpected business expense isn’t a matter of if
it will happen, but when. Consider setting money aside each month into an
emergency fund to be used only in case of a significant expense. A longer
term goal could be to save enough money to cover 3 to 6 months of operating
expenses.
Partner with a business advisor
Even small businesses sometime need
help keeping their cash flow in line and avoiding unexpected expenses.
Please call if you have any questions about organizing your business’s
cash flow and preparing for surprise expenses.