Cash Flow Strategy Matters Even For Successful Companies

Cash flow is the actual movement of money coming in and going out of a business. Without good management of this movement, companies can face some major financial challenges and even close down.

As a matter of fact, cash flow problems are responsible for the failure of around 82% of small businesses. Even businesses that seem to be doing well are not immune to the risks of poor cash flow management.

Maintaining a healthy cash flow is necessary for the overall stability of your business.

If your business is making more money than it spends, that is called having a positive cash flow. But if your business is spending more money than it makes, that is called negative cash flow. A negative cash flow can make it hard for you to pay for everyday expenses, pay back any debts, and sustain your business over the long term.

The risk that comes with a negative cash flow is that it can quietly deplete your business's financial resources until, one day, you realize you can't pay for things you need. A positive cash flow, however, gives your business enough liquidity to pay for everyday things and even expand.

How to maintain a stable cash flow?

In order for businesses to successfully manage their financial health, they need regular cash flow projections. It might sound counterintuitive, but some of the most cash-strapped businesses are actually those that are growing really fast. With regular cash flow projections, you can see any problematic situations before your cash reserves are already low.

Many business owners think that annual projections are enough, but I recommend monthly or even weekly cash flow projections. They give you a more granular view of your financial situation and the chance to make timely adjustments. A 12-month rolling forecast is generally the best because it helps you easily see potential cash shortfalls and take any necessary proactive measures. This helps you make sure that minor fluctuations do not turn into major financial obstacles.

Consider also building a cash buffer for your business. When your business is doing well and making good money, put some of those profits into a separate account that is to be only used to pay for unexpected expenses. This cash reserve will be your safety net when you don't have as much money coming in — whether due to seasonal changes in demand, a late payment from a big client, or other unforeseen financial challenges.

As a business, you should also always be raising funds. Even when your cash flow is healthy, keep seeking new funding or financing to make sure you have money on hand when you do need it. A good option I recommend here is to set up a line of credit so you can borrow money when you need it without the pressure of immediate repayment.

Make the right financial decisions to secure your cash flow.

The US Small Business Administration (SBA) offers guaranteed loans that have lower interest rates and more flexible terms. These loans can help you keep your monthly payments low and reduce the risk of experiencing cash flow shortages each month. While it is true that the approval and funding process for SBA loans can take anywhere from 30 to 90 days, these loans can help you build more stable cash reserves without the risk of overextending your financial capabilities.

If your business does not qualify for an SBA loan, you can create a Lean budget to maintain a healthy cash flow. Try not to spend on things your business does not really need and only invest in areas that are directly improving your business's productivity.?

Keep cash flow strong with professional debt collection services.

Cash flow is what keeps your business stable, and managing it effectively can mean the difference between thriving and just getting by. If you are experiencing challenges with unpaid debts, look no further than Williams, Rush & Associates LLC. We can help you recover what is owed to you and make sure that your business has the cash flow it needs to keep moving forward.

If you want more insights on debt collection and financial strategies to improve your cash flow, follow my LinkedIn blog.?