Several factors need to be considered as a new business owner, and even if you have been in business for a long time, cash flow is not a thing to take lightly.
How much cash comes in and goes out of business is very important, it is even more essential to carefully observe the pattern at which it works because this way, you will be able to identify if it is a positive or negative occurrence that is going on there.
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With a positive cash flow, more money is seen coming into the business than what is going out, while a negative cash flow on the other hand, means there is more money going out of the business than what is coming in.
Cash flow significantly affects working capital and that is the reason why a negatively lingering cash flow issue will begin to affect other business runnings and every day expenditures.
Cash flow strongly affects a business, the more reason why a company that has cash flow issues has a high chance of crumbling. It is very important to understand how safe your business is cash wise, if there is a problem, it is better to begin to look for other sources of income or totally reduce spending, in order to save your business.
Change and unexpected occurrences can happen to your business at any time, it is a smart move for you to have sufficient cash to help you navigate for atleast one month or more. The changes I am talking about has the capacity to affect businesses of all types regardless of the size. Here are possible case scenarios of having your business affected;
- The loss of a major client.
- Lingering debt from customers.
- Customers sudden change of taste.
- Changes in the price of raw materials.
- Loosing a major client.
- The entrance of cheaper alternative in the market.
These changes and many more can happen at any time, so you need to be prepared as regards cash flow. The big question then is, how does a business increase cash flow? Every business has it's own unique strength and weakness, that is why the method of navigating cash flow is unique for each business.
However, there are strategies in place that works on a general note for virtually every business type, and as regards cash flow.
- Accept advance payments.
- Drastically limit the options of selling and giving out services on credit.
- Increase inflow of cash.
Posted Using InLeo Alpha