At its most basic, business cash flow is the amount of cash going in and out of a company. More to the point, it is how much is left after all expenses are paid. A positive cash flow is most desirable because it indicates an enterprise receives more revenue than it spends. Conversely, a negative status suggests an issue with efficiency, spending or another financial problem. Even if a business is profitable, it can fail without properly managed monetary reserves.

 

Use Business Lines of Credit

To improve business cash flow, use the company’s existing lines of credit or acquire such an account. During crunches where new inventory must be purchased without depleting cash reserves, credit accounts help cover the costs of operation while avoiding the use money needed for daily transactions. Instead, the amount due can wait until the end of the month when more revenue has a chance to enter the enterprise. As a bonus, some credit lines offer cash back options, which can have a positive impact on finances.

 

Perform Regular Financial Analysis

Business cash flow management necessitates long-term planning and preparation. Researching supplier and industry practices is imperative to healthy growth and maintenance. Predicting monetary trends is critical to properly overseeing flow of money in an out of the company. Executives and business owners must remain cognizant of the enterprise’s financial status as they make important budget decisions. As such, they should have finance meetings regularly. In the end, they will make more effective usage of cash in regards to expenses, marketing and payroll.

 

Effectively Manage Accounts Receivable

The most common culprit behind business cash flow problems is late customer payment. When a client fails make payments in a timely manner, it severely impacts the business’ finances. On paper, the company should have a given profit, but the funds have yet to come in. Consequently, the owners find they don’t have the essential funding to purchase required materials. The easiest way to avoid this problem is to do away with accounts receivable. Use up front payments as an alternative. However, if this isn’t a viable course of action, consider early reimbursement incentives like discounts or preferred interest rates.

 

Research and Renegotiate

Vet suppliers and know what the company truly needs. Research prices ranges for raw materials and go into the negotiation process understanding what to expect. As the enterprise grows, renegotiate often. Old terms and agreement may become outdated, as the business must meet new demands. The larger a company is the more clout it has to demand better deals. If possible, revisit supplier contracts on an annual basis.

Scroll to Top