If you’re a business owner and your profits are increasing every year, you are headed in the right direction. However, don’t rest on your laurels. Even a growing, profitable business can experience cash flow issues if its operations, investing, and finance activities are not running smoothly.
For example, you will have cash flow issues if payables are due before receivables come in. You won’t be able to pay bills on time, which can lead to bigger issues, such as making payroll and having your creditworthiness questioned.
In this blog, we will define cash flow, list the 3 types of cash flow, and offer you 10 tips to improve cash flow in your small business
Cash Flow Defined
Cash flow is just what it sounds like: the cash flowing in and out of your business. The success of a company is determined by whether or not it has a positive cash flow through normal business operations.
Cash flowing into the business is known as inflow and is revenue from selling goods/services and income from investments.
Cash flowing out of the business is known as outflow and is debt payments and other expenses.
3 Types of Cash Flow
There are 3 primary types of cash flow:
Operating activities
Financing activities
Investment activities
How Can Cash Flow be Increased?
There are several things you can do to improve your business cash flow. Keep the following tips in mind:
Lease, don’t buy
Offer discounts to customers who pay early
Do credit checks on customers before extending credit
Establish a buying co-op
Improve inventory
Immediately send out invoices
Make payments electronically
Negotiate lower prices with suppliers
Use high-interest savings accounts
Increase prices
Conclusion
What it all comes down to is this: healthy cash flow is the result of efficient, smooth operations. While implementing these tips can help, it’s also important to consider your marketing, customer service, new customer acquisition, and other factors. Contact Achieve Capital Advisors for help in creating a positive cash flow for your business.