Money Management Guide: What is Cash Flow and How Can You Improve It?
We live in trying times and finances aren’t always available for easy use. The key to paying the bills and growing your business is having a set cash flow that handles your needs. Every business needs cash flow, but not everyone has it.
It could be you don’t have enough because of your current customer base or you’re not selling enough product and cash flow is extremely limited. We created this guide to help you understand what is cash flow and how you can improve it.
There’s nothing worse than being unable to pay the bills, so learn ways to increase your cash flow.
What is Cash Flow?
Cash flow isn’t just the amount of cash coming into your business. It’s the net cash and cash-equivalents that go in and out of a business. To survive, the company must bring in more money than it takes out.
This is called a positive cash flow. Many businesses have assets such as property and equipment that add value to the company but are not easily transferred to cash. This is called cash poor. Many businesses invest money into their business but end up cash poor because the asserts cannot quickly be liquidated.
Lease Equipment Don’t Buy It
It may be counter-intuitive because the long-term cost of leasing your equipment ends up costing more than buying, but for a company with limited cash flow, it makes sense.
Leasing provides your business with immediate monthly cash flow for managing the day-to-day operations of your business.
Consider a Buying Cooperative
Many times, small businesses have a difficult time competing with large companies because they can’t purchase items in bulk and receive a lower price. Buying cooperatives allow multiple companies to come together and purchase products as a single unit.
This allows you to improve your cash flow because you’re able to purchase the item at a bulk discount.
Take Electronic Payments
The last thing a company wants is to wait for the postal service or for the customer to come in and make a payment. It can take days or weeks for that to happen and that’s after you send out the invoice.
Instead, take payments via credit card or online and allow for immediate transfer of funds from the customer to your business.
Conversely, you can use credit cards to make payments the day the bills are due. This helps improve your cash flow by giving you more time to make the payments.
Experiment with Increased Pricing
Many companies worry that increasing prices will lead to fewer sales, and that is a valid fear, but that doesn’t mean you can’t experiment with increases in prices. You may see little change in sales numbers, but a benefit to cash flow.
If you do notice a drop in sales, then decrease the price again.
Businesses Thrive Through Cash Flow
What is cash flow? It’s what a business needs to survive and thrive. Take advantage of these ways to improve your cash flow and watch your business grow. The last thing you want is to be cash poor, so increase your cash flow.
If you want to know more methods of improving cash flow, then please explore our site.