Cash Flow Is King – And You Need To Rule

“Cash is King”: It’s a phrase we know all too well – AND – the hard truth when it comes to managing a business. Without cash, you can’t pay your suppliers and employees. Without supplies and personnel, you can’t produce your product or service. Without a product or service, you can’t make sales; and, without sales, there IS no business. Therefore, effectively managing your cash flow and understanding the timing of cash ins and outs is ultimately the key to successfully growing and maintaining your business.

How can you take control of your cash flow?

  1. Make a cash flow forecast. The general rule of thumb: Have a 12-month rolling forecast of your cash needs. Think about the current status of your cash flow and where it is going in the future. As sales increase (cash in) you may want to invest in expanding the business (cash out). Will you need more employees? More inventory? More space? Projecting future cash needs will allow you to maintain a positive cash flow.
  2. Identify when you will have cash shortfalls so that you can plan on obtaining a line of credit. Banks typically don’t want to lend you money when you absolutely need it. Use your cash flow forecast to understand when you will be low on cash and plan ahead to get a line of credit BEFORE you need it.
  3. Understand timing on your receivables and payables. Review the terms to evaluate when payments are due in and out. How fast are you getting paid? How fast do you need to pay your vendors? If payment is due to your vendors immediately, but you receive payments from your customers slowly over time, you might have difficulty funding your payables. Once you understand the timeline of when cash is coming and going, you can identify key problems like this and determine solutions like allocating some resources towards getting faster payment from your customers.

Following these steps, like making cash flow projections and computations, can be confusing. Don’t be afraid to turn to an expert for advice. A seasoned professional can identify the best ways to manage cash flow for your business and get you on the right track toward growth and profits. Understanding your cash flow can be the single largest factor in the success or failure of your business, so it’s time you take the reign and rule your cash flow.

Have questions or need tips on managing your cash flow? Contact Elijiah at 267-446-0362 or egray@b2bcfo.com.

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photo credit: __Iain Lamborghinis and them Bentleys on the V-sets via photopin (license)

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