Many business owners are unaware of just how important cash flow is for their business growth and financial health.
In simplest terms, cash flow can be defined as the money that is moving in and out of a business in a month. Cash comes in from clients who buy your products or services. At the same time, cash is going out of your business in the form of payments for bills, rent or mortgage, payroll, investments and everyone’s favourite, taxes.
Essentially, cash flow of a business gives owners a measurement of how much money a business generates and how much it spends, which helps in keeping track of expenses and creating a monthly budget.
Businesses must aim to achieve a positive cash flow, since it means more money is entering the business than leaving it and it will have more resources on hand to fuel growth. On the other hand, a negative cash flow is exactly the opposite, and is one of the most common contributing factors to a business failing completely.
Planning and Getting Organized
Having an accurate cash flow statement will let you know exactly how much funds you have available at that given moment, allowing you to be organized to better plan ahead.
Any plans you make can be supported by the statements, making sure you don’t make any decisions that can put your business at risk.
You must track monthly expenses, such as rent, insurance, marketing, payroll advertising, utilities, taxes, and so on. This will help you avoid any unwanted surprises and ending up with a negative cash flow.
Managing Cash Flow
Your cash flow statements will help reveal whether you need to cut expenses or increase the cash you have coming in.
Proper financial planning can determine what steps you need to take to maintain a healthy cash flow and even boost it. Whether you decide to drop late-paying customers or offer discounts, a professional financial planner will work with you to design a plan that will help achieve all your goals and grow as a business.
By reviewing previous cash flow statements, you can detect any potential risk areas and be prepared with extra cash in case a negative scenario comes to life.
Expand at the Right Time
Growing and expanding can either make or break a business.
Growing a business can be incredibly exciting, as you’ll be entering new markets, reaching a bigger audience, and best of all, getting more revenue. However, growth requires a lot of cash, since you’ll need to hire new employees, lease new commercial location or perhaps open a secondary location.
The success of your business expansion will mainly depend on how financially stable your business is. Expanding at the wrong time or in the wrong way will likely lead to problems later on.
By studying your cash flow statements, you’ll be able to figure out whether or not your business can sustain an expansion without running into problems, all while minimizing risk.
How Priti Lad CPA Corporation Can Help With Cash Flow Management
Does your business have issues with cash flow?
Running a business alone is not easy, and can get overwhelming at times. Whether you’re just starting your business or have been growing for a while, our expert financial planners are here to guide you in the right direction.
Having one of our experienced mentors by your side will help you make the tough decisions and keep you on track to achieving your business growth goals.
Book your consultation today to find out how we can help with improving the cash flow of your business.