Cash flow - your success depends on it
There's a reason why people say cash flow is everything. It’s because it is! Monitoring cash flow is like monitoring your pulse - if it’s weak, you’re in trouble. Find out what you need to know here.
Cash flow management is a critical aspect of running a business. It’s all about the movement of money in and out. Therefore it’s pretty important that you’re familiar with the different ways that poor cash flow management can lead to business failure, so you can make sure you don’t get caught out!
Here are some of the main hazards to avoid:
Insufficient cash reserves
Otherwise known as not having enough in the bank! It’s important to have a cash reserve to cover unexpected expenses that crop up from time-to-time, and to smooth out any fluctuations in revenue. Without sufficient reserves, businesses can struggle to meet their financial obligations and sadly, many are forced to shut down.
Sloppy billing and collections
If your business isn’t efficient at billing and collecting payments from customers, it can lead to a delay in receiving the cash to meet your own financial obligations, which is never a good place to be.
Poor budgeting and financial planning
Without a solid budget and financial plan, it can be difficult to accurately forecast the cash needs of your business. So making informed decisions about spending and investment gets tricky. You could, for example, end up with too much stock, or you might ‘overtrade’ by employing more staff than you can really afford.
Overspending
If your business isn’t careful with the planning, monitoring and management of its spending, cash reserves can quickly deplete and you can find yourself in unintentional financial trouble.
All your eggs in one money basket
Being dependent on one single source of revenue is risky for any business. So diversifying your income sources is really important in mitigating financial failure if one source dries up.
By paying close attention to cash flow and taking steps to manage it effectively, you immediately increase your chances of success. So, if you haven’t already, it’s time to get that cash flowing and working for you!
