When it comes to the financial management of any business, its often said that Cash Is King!
Whether your business is growing or struggling, managing your cash flow effectively is absolutely essential, and for many, its the key to business survival. You’ve probably heard the statistic that over 60% of businesses that fair are still profitable, but just ran out of cash.
If you’ve used a lot of your working capital, you may come up against a cash crunch that prevents you from paying suppliers, buying materials and even paying salaries. The time delay between the time you have to pay your suppliers the time you receive money from your customers is the problem, and the solution is cash flow management.
That’s why it’s critical to maintain a level of working capital that allows you to make it through those crunch times and continue to operate the business. Simply put, cash flow management means delaying outlays of cash as long as possible while encouraging your customers to pay it as quickly as possible.
Before we delve into the strategies to improve & manage cash flow in your business, lets first look at the the basics of cash flow management.
So, what is cash flow? It’s basically the movement of funds in and out of your business. Typically, businesses track cash flow either weekly, monthly or quarterly. There are essentially two kinds of cash flows: