If you are a new business owner, you may feel overwhelmed with all the business elements that you need to plan and manage including budgets, growing and maintaining a solid customer base, hiring and nurturing great employees, marketing, dealing with competition, and paying taxes. Above all of these is cash flow management. Cash is frequently called “the lifeblood of business.” The symbolism is striking. Cash flow is the “flow” of funds in and out of a business, and just like blood which is the life of the human body, sufficient cash must continue to circulate to keep the “body of a business” healthy.
Why is Cash Flow Important
Healthy cash flow makes it possible for a business to pay its employees and other operating expenses on time. It facilitates the purchase of inventories and equipment, keeps vendors and other stakeholders happy, helps avoid expensive debt, and paves the way for business profitability.
What Are Potential Cash Flow Problems
Poor cash flow management is the leading reason for new business failure. These problems can be avoided which can sink a new business: late payments from customers, funds withheld by investors or financial institutions, continued use of old and ineffective equipment, underpriced/undervalued products or services, lack of profitability, and problems with tax filing.
Cash Flow Management Tips for Beginners
Use these cash flow management tips to help secure business success:
- Set up a reliable bookkeeping system so that you can review and understand all the financial transactions of your business
- Generate cash flow statements and review them frequently
- Measure, analyze, and forecast your cash flow so that you know when you will need more cash
- Speed up the collection of all accounts receivable
- Manage payables to optimize payables terms
Improve inventory management
- Manage to spend carefully and reduce it where possible to conserve cash
- Take steps to prevent fraud
Seek Expert Financing Assistance
Contact Array Financial, based in Raleigh, NC. We offer a wide variety of funding options with quick and flexible financing to meet the needs and goals of small businesses.