4 Arguments for Keeping Strong Cash Flow
With a flurry of ingoing and outgoing cash, it can be difficult to get an accurate picture of your small business finances. The best way to see where your company stands during a specific period is cash flow. If it’s positive, you’ve received more money than you’ve spent. A negative amount means you’ve spent more than you’ve earned, which could be a problem if it turns into a pattern. In order to stay on top of your finances, here are four arguments for keeping your cash flow strong.
There’s nothing like making a purchase with cash. Customers and other businesses are likely to buy or sell at a discount if you’re working with cash. Having plenty of money in your bank account allows you to avoid unnecessary loans and financing options. A well-timed loan can help increase your financial position, but it costs more in the long term.
Use your strong financial position to get out of debt and stay that way. Keeping a strong cash flow can reduce or eliminate the need to going into debt. This will save you vast sums of money in the long-term life of your business.
A stagnant business is a dying business. Use your cash-in-hand to update, improve and expand your current business. If you see a great investment opportunity, you can strike immediately without worrying about length loan applications, stringent financing regulations or high interest rates. Keeping your bank accounts at a comfortable level can cause you to have more even, sustained growth, and also keep you safe in the event of an unexpected emergency or slow time of year.
Responding With Flexibility
When the unexpected strikes, few businesses are prepared. From losing customers to broken equipment, a major expense could come at any time. If you’re cash poor, you don’t have the flexibility to respond to a crisis. You need to take drastic measures or stall until you can become approved for a loan or line of credit. With enough cash in your accounts, you’ll be able to respond to almost any event without resorting to emergency measures.
While not every business can immediately reach a position of strong cash flow, it’s an important goal. Having the capital necessary to avoid debt, buy with cash, sustain growth and respond flexibly is a great way to keep your business growing well into the future. If you aren’t in a position of strength, use your limited cash to begin to work towards this goal.