Cash Flow Management Made Simple with these Tips and Tactics

Cash flow is the keel of your business, keeping it afloat and moving forward. Poor cash flow management is the leading cause of failure among small businesses, but these tips and tactics can help you avoid becoming part of that statistic.

First, a quick review. Cash flow represents the money coming into and moving out of your business. It’s either positive – sales and receivables are higher than expenses and payables, or negative — you’re paying out more than you’re taking in.

Having a profitable business doesn’t mean positive cash flow. Profit is calculated by subtracting expenses from revenue. But cash flow is based on collecting money needed to generate profits. Cash fuels your ability to produce products or pay salaries of workers providing services. Business stability and profit growth are driven by cash flow.

As simple as cash flow seems on paper, managing it effectively takes effort. A monthly cash flow analysis can give you visibility into cash flow status. Developing a favorable cash flow position needs to be part of your business plan. Growing your business – through new customers, more products or market expansion, without considering your cash needs can slow your progress.

Improving Cash Flow

If your review shows room for improvement, use these steps to strengthen your cash flow position.

• Speed up receivables collections. Use a lockbox for faster check processing, ask customers for preauthorized checks or transfer checks, and centralize your bank accounts.

• Tighten credit terms. Assess customers’ ability to pay through applications or credit reports prior to extending credit. Accepting credit cards, even with a two to five percent fee, will get faster cash payment.

• Offering discounted pricing. Early-pay discounts will cut into profits but can increase cash flow.

• Taking out a loan. Credit lines or equity loans can help improve cash flow in the short-term.

• Boosting sales with current customers. It’s less expensive to sell to existing customers where payment relationships are established.

Talk with Trihawk Capital about funding options for strengthening your cash flow and building business momentum.


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