Certainly, a healthy cash flow is vital for every business so it can thrive and grow. Cash flow problems create stress and are a sign of business troubles. It is reported that 82 percent of business failures are attributed to cash flow problems.
Why is Healthy Cash Flow So Important?
Cash is used to pay for current expenses like employee salaries, operating overhead, purchases of inventory and supplies, and equipment acquisition. When cash is available, a business is liquid enough to seize opportunities, attract investors, and secure needed growth financing.
Cash Flow Management Principles
Good cash flow management requires a consistent process of tracking all funds that come into a business and monitoring all funds that flow out of the business. It requires a plan and strategy for dealing with potential shortages to avoid a cash crisis. It also requires accurate and up-to-date financial statements that are reviewed frequently and acted upon promptly to correct deviations from the financial plan. Taking steps to prevent problems and to increase the cash flow is essential.
How to Improve Cash Flow
Accelerate business receivables to receive cash as quickly as possible. Tactics to do this can include getting a deposit or payment up-front for large orders. Invoices should be sent immediately after the delivery of products or services. Alternatively, invoices could be sent out as partial orders are delivered. Make sure that past due accounts are followed-up quickly with reminder notices and late payment penalties. Further, make it easy for customers to pay, even incentivizing early payments.
Negotiate all payables to be able to pay as late as possible.
Find ways to reduce expenses.
Sell non-essential assets.
Reduce inventories.
Improve business processes to improve profit margins.
Take strategic price increases.
Secure a business loan to increase capital.
Seek Expert Financing Assistance
Contact Aspen Capital Solutions, based in Atlanta, GA for the financing assistance you need to meet your business goals. We offer a variety of financial products and financial expertise that you can trust.
