Managing Cash Flow
For any business, negative cash flow is an indication of a problem that, if left unchecked, can result in a failed venture. As a small business owner, you can treat negative cash flow like a medical symptom. You should observe it, locate the source and take the opportunity to correct it, restoring financial health to your organization. Here are some common contributors to negative cash flow that you’ll want to be aware of.
Too Much Inventory
If you’re selling a product, don’t purchase more than you can sell in a reasonable amount of time. Too much product in inventory can tie up your cash and get you in a bind.
No Sales Projections
A lack of solid sales projections can cause the overabundance of inventory as mentioned above, or it can leave you unable to accept orders because you don’t have enough inventory. Accurate projections require a great deal of knowledge and experience, but they can prevent you from getting in to a tough spot.
Expanding your business may seem like the most logical way to increase sales. But if you expand too far or too fast, the investment required to grow can cripple your entire organization.
If a customer owes you money, it’s not unreasonable to seek payment. Be wary of extending credit to customers who have a hard time paying on time, and recognize it’s sometimes necessary to turn delinquent customers over to a collection agency. It’s not an ideal situation, but it’s better than never getting paid.
Too Much Credit
An infusion of cash through a business loan can provide your company with a much-needed boost. However, if you have a less than favorable interest rate and unsteady cash flow, you may find it difficult to get and stay ahead.
Some cash flow issues can be aided with the help of Community Bank products like remote deposit, merchant services and others. But these are simply tools to help you run your business efficiently. To create the positive cash flow you want, you need to complete a cash flow analysis so you can follow the symptoms to their source and fix the problems. If you need our help, we’re always here.