THE IMPORTANCE OF A POSITIVE CASH FLOW

December 16, 2017 Hansie Britz No comments exist

“Cash Flow” refers to the revenues a business generates (and collects) compare to the expenses it pays out over a fixed period of time. Broadly speaking, businesses bring in money through sales, financing and returns on investments. And they spend money on supplies/services, as well as utilities, taxes and other bills.

Cash Flow problems affect many businesses. And the data backs it up: According to a recent survey 3 out of every 5 businesses experience them. Still, while cash flow problems are not uncommon, business owners are better of doing whatever they can to avoid them altogether.

BENEFITS

Businesses that master cash flow management can:-

Pay their bills

Positive cash flow ensures employees get paid each payroll cycle. It also gives decision makers the funds they need to pay suppliers, creditors and the Government.

Invest in new opportunities

Today’s business world moves quickly. When cash is readily available, business owners can invest in opportunities that may arise at any given point in time.

Stomach the unpredictable

Having access to cash means that whenever equipment breaks, clients don’t pay their invoices on time or new government regulations come into effect, businesses can survive.

SYMPTOMS OF POOR CASH FLOW

If your business is suffering from any of the 5 following symptoms, cash flow problems may very well be on the horizon:-

  1. Your accounts receivables are high.
  2. You have too much inventory on hand.
  3. You’re overextending your business.
  4. Your sales are declining.
  5. Your business just isn’t profitable.

HOW TO MANAGE CASH FLOW

  • Know when to lease and when to buy.

Virtually all businesses need equipment, facilities and property in order to operate. Whether they should buy or lease those items is another question. If your business is strapped for cash, you might want to consider leasing equipment and renting retail or office space rather than buying it outright.

  • Make it a habit to shop around for better prices.

While it’s probably counter productive to shop around for new suppliers every other day, it might be worth reassessing your operations on a regular basis – whether monthly, quarterly or even yearly will depend on the scope of your business.

  • Consider increasing your prices.

When is the last time your company raised its prices? While your customers might not like it, just ensure your business is carefully planning your price increases and marketing them effectively. You’ll be able to generate more revenue – and maybe even more sales – while padding your bottom line.

  • Bill on a more immediate basis.

If you’re having cash flow problems, you, might want to consider accelerating your billing process, sending out invoices the moment when jobs are completed and orders are shipped. In doing so, you ensure that your client’s get their invoices faster – which hopefully means you’ll get paid quicker.

  • Incentivize customers to pay sooner.

To solve cash flow problems, you might want to offer customers favorable payment terms if they pay their invoices early.

  • Maintain cash flow statements.

By producing cash flow statements, you’ll be able to make the right adjustments to your business should you need to – whether that’s increasing prices, reducing expenses or embarking on new campaigns – to make sure your business always has the money it needs to thrive on hand.

  • Leverage modern technology.

Because the right technology makes your employees more productive, it follows that you’ll have more goods and services to sell than you would with employees relying on outdated technologies.

  • Focus on cash flow instead of profit.

Your business might generate a considerable amount of profit. But a good majority of that profit could be tied up in receivables., which doesn’t do you much good when it comes to you needing cash to cover your operating expenses.

Need any help with your cash flow problems. Let us help you out. Contact: (27) 84 583 3143 OR money@global.co.za

 

                              

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