Top Five Ways to Improve Cash Flow

A positive cash flow is the key to business survival. It pays salaries, buys supplies, makes investments in infrastructure and funds future growth. A business with consistent positive cash flow is positioned to respond to real-time opportunities and challenges.

If you want to make great strides in your business, you need to know exactly how much money is moving in and out of your business, so you can pivot and make changes quickly. Cash flow provides a picture of money coming in through sales, financing and returns on investments. Companies that experience negative cash flow have a limit on how long they can survive.

Even the best-run companies encounter cash flow problems periodically. Fortunately, most issues can be prevented with planning and the right strategy.

The lack of a cash flow management process can be a costly blind spot. Sadly, many businesses fail because the owner did not identify a cash flow problem due to a lack of planning or understanding their working capital needs. The key to survival is implementing proactive cash flow strategies and monitoring tools to identify both long- and short-term cash needs.

Proactive Cash Flow Strategies

There are times when your company can use a cash boost. A strong banking relationship is invaluable to your business when cash is tight. Take the time to cultivate banking relationships that can be leveraged when opportunities or threats confront your business. An established banking relationship should be able to provide solutions to help your business obtain financing, enhance cash flow and stay secure. Seek a banker who will be there even when times turn tough.

Business owners with favorable credit histories can establish an unsecured line of credit with their bank to cover cash flow gaps caused from timing differences between payables and receivables, seasonality or other short-term cash needs.

Additional working capital solutions included secured lines of credit, Account Receivable (A/R) financing and A/R factoring.

It is tempting to purchase “big ticket items” like commercial vehicles or equipment with operating cash. After all, it is often inconvenient and to ask for money from bankers and lenders. It is worth the effort to work with your banker to leverage today’s low-cost, long-term financing to purchase and/or refinance assets, such as commercial vehicles, equipment and commercial real estate. It is better to amortize these expenses overt time and improve your liquidity.

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Find these tips useful? Learn more tricks on how to maximize the potential of your business through The Partnership’s Top Five series or through the Small Business Resources Hub.