Anyone who has ever gone into business has done so to make money. When you boil it down, that’s the whole purpose for the business existing. To make a profit, however, you need to have positive cash flow. Unfortunately, there are some impediments you may find your business facing that make achieving that more difficult.
Cash flow is a careful balance of income and expenditures. While most businesses do need to carry some amount of debt, at least at the beginning, paying back that debt and the interest you’re accruing is an expense that’s going to eat into the money you bring in. As such, it’s important to be very careful with how much debt you take on. It’s best to keep your credit debt under 30 percent of your business capital to show lenders that you’re profitable and responsible with your money.
You can’t talk about protecting the cash flow of a business without discussing waste. There’s more than one kind of waste that can be eliminated or managed in the workplace. Wasted time and materials are two major forms of waste that your business needs to have under control. To eliminate waste, start by identifying where the waste is coming from. This may mean monitoring your employees and the processes they go through to get work done more closely for a time before you can figure out how to make things more efficient.
Businesses rely on solid planning to function properly. Putting together accurate sales forecasts, planning effective marketing strategies, and anticipating ways to make up for customer turnover are all things that involve careful planning and attention. If your sales forecasts aren’t accurate enough, you could end up overordering your supplies, which is wasteful and costs you money. Ineffective marketing strategies can prove to be useful learning experiences but are also a waste of money. Every business is going to have customer turnover. Failing to plan for this and come up with ways to attract new clients will eventually result in you going under if corrective action isn’t taken soon enough. Proper planning is vital to achieving a positive cash flow.
Achieving positive cash flow takes discipline and careful budgeting. Debt, wasteful practices, and poor planning are just a few of the things that make it more difficult to do. The good news is that when you know what the things that threaten your cash flow are, you can come up with a plan of action to address them, making a positive cash flow something that can be within your grasp.
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