Cash Is King: Keeping Cash Flow Healthy
For many businesses, the most important factor to success and keeping a great credit score is the amount of cash available. A healthy cash flow is the key to a thriving, vibrant business in the midst of financial uncertainty and unexpected crises. Discover how to keep your cash flow positive, as well as some benefits that you can look forward to with a healthy level of working capital.
When you are receiving more money than you are spending, your business is said to have a positive cash flow. On the other hand, spending more than you earn will leave you with negative cash flow. Short-term financial issues or slow seasons are typically with most industries. However, if several months or even years go by with a negative cash flow, your business could be in a tight situation. Don’t settle and struggle to get by, use your cash for positive growth and risk avoidance.
The Big Picture
Some small business owners mistake profit and loss statements as an accurate picture of their cash flow situation. However, this statement doesn’t take any additional financial data into consideration, like accounts receivable, taxation, inventory and more. Get accurate information on all of these areas in order to truly understand where your company sits.
Leverage Your Credit Score
If your cash flow situation isn’t looking so good, consider using your credit to push your business into a positive cash flow situation. There are a number of financing options available to companies with a high score. Your credit can be used to receive short-term financing, long-term financing or cash advances. Each of these can be used to cover a specific area of weakness, so it’s important to understand your particular financial situation completely before determine the best financing option for your business.
Stay Ahead of the Game
Some small business fail because they don’t prepare for expenses. There are many weekly, monthly and yearly expenses that are scheduled. Things like taxes, monthly payments and contract renewals shouldn’t come as a surprise to you. If you aren’t prepared, you’ll quickly drain your working capital on foreseeable expenses. Keep track of any scheduled bill, and estimate when important machinery and inventory will need to be replaced. With careful financial planning you’ll not only enjoy positive cash flow, you’ll also have a high credit score to take advantage of any financing your business may need in the future.