A new business has many cogs is what is really a big machine. There are many things for the entrepreneur to worry about , from competition to proper staffing to the market to revenue to marketing and so on. One of the things that is of vital importance to any business is cash flow.
What is Cash Flow?
Business cash flow can be defined as simply beginning cash versus ending cash, inclusive of cash in and cash out. This means that you receive cash as income for your business at a certain interval, but must also dispense out cash for bills and business expenses. Your ending cash after all the bills have been paid is your revenue. Increasing the revenue means a changing cash flow. A changing cash flow in the positive means your cash in has stayed the same while your cash out has decreased, or your cash in has increased while your cash out stays the same. How much money your business is bringing in on a regular basis versus how much gets paid out on a regular basis is cash flow.
Once you’ve determined your business cash flow, then you can make the determinations of how that cash gets dispersed. After all the necessary expenses are taken care of, you can look at how much money is left and decide whether or not to reinvest it into the business and expand it. Sometimes there is enough left over to do so, and sometimes the excess money needs to be saved in a business account until enough gets saved to expand. Expansion may include more employees, more resources, an increase in marketing and market territory, a larger location or even an additional location.
How to Increase Cash Flow
Stretching every dollar is something all new business owners must do in order to remain afloat. Be sure to deposit all checks and cash in as soon as possible after you receive it. This will give a more accurate representation of how often your business receives money. Likewise, try to stretch out business expenses as sparsely and far out as you can without acquiring penalties. What this will do is decrease the amount of cash out, and increase your overall business cash flow because you could then potentially be receiving cash almost twice as often as you send it out.
An adequate cash flow is essential to staying in business and expanding your empire. With these little tidbits of information, you’re well on your way to stretching your dollar further and knowing whether your business is ready for expansion.