A healthy cash flow is an important factor for every business to thrive in the midst of financial difficulties and crises. For most businesses, the amount of cash available determines its success and credit score. Discover how to keep healthy cash flow and also the benefits of healthy working capital.
A positive cash flow is when you are receiving more money than you are spending. If you do otherwise, that is spending more than you receive you will have a negative cash flow. Every company faces financial difficulties once in a while but if you maintain a negative cash flow for a long period of time, your business will be in a tight spot. This can be avoided if you use your cash for positive growth in your business.
The Big Picture
Most business owners make use of their profit and loss statements to measure their cash flow, this is a mistake. However, this statement does not put any additional financial data such as accounts receivable, taxation, inventory etc into consideration . Get more information on these areas to understand your company’s position.
Leverage Your Credit Score
If you have a negative cash flow, try pushing your business into a positive cash flow situation. A lot of financing options are available for businesses with a high credit score. Business owners should understand their financial situation before applying for funds, this can help to cover up their companies weaknesses. Your credit can be used to receive term loans, lines of credit and cash advances.
Stay Ahead of the Game
Some businesses have failed due to inadequate provision for their expenses (lack of proper planning). Schedule all weekly, monthly and yearly expenses. Adequate provisions should be made for expenses like taxes, monthly payments, and contract renewals. Failure to do this your working capital will be drained on foreseeable expenses. Ensure you keep track of your scheduled bill. You’ll not only enjoy positive cash flow when you make adequate planning but you’ll also have a high credit score which will aid in securing funds needed by your business in the future.