You have heard the expression ‘Profit is Vanity, Cash is Sanity’ at the end of the day cash flow is the lifeblood of any business which oils all the parts and keeps the machine going. So when cash flow is poor, a business is poised to sink. In fact, about 90 percent of small businesses fail due to cash flow problems. Don’t become a statistic!
Follow these tips to prevent poor cash flow:
1. Stay organized
New business owners all too often put bookkeeping on the back burner. They’re so busy getting their company started that they don’t take the time to organize the books. While understandable, it’s certainly not recommended — failure to organize can lead to late payments and a cash flow crisis.
2. Plan for emergencies
It’s impossible to predict certain business troubles, such as a poorly-performing product or major equipment failure. To prevent situations like these from hurting your cash flow, always include cash reserves in your financial forecast. This way, you’re ready for whatever curve ball is thrown at your business.
3. Grow carefully
Growing your company is an exciting prospect, but it’s important to proceed with caution — especially in terms of cash flow projections. What’s your goal? How much can you realistically spend to achieve it? Don’t force growth without the necessary funding, or you could very well end up in debt.