Cash flow is the lifeblood of any business. It is integral to meeting financial commitments, including supplier payments, overheads, staff salaries, debt repayments and any other cost you must undertake in your business.
Without good cash flow, your operations would fall apart and culminate in debt. It is, therefore, crucial you maintain it effectively.
Our guide explores everything you must know to manage and improve cash flow, including:
- What is the impact of negative cash flow?
- How do I know if I have a cash flow problem?
- What are the leading causes of cash flow issues?
- How to better manage your business cash flow
- External finance options to improve long-term cash flow
What is the impact of negative cash flow?
If cash flow is poorly managed, several issues will emerge in your business. The most prominent is an inability to meet your financial commitments.
Over time, this will lead to disruption, whether the inability to pay suppliers or staff on time. Your whole operations could come to a halt, preventing you from bringing in revenue to address the cash gap.
If you fall behind on payments owed to creditors and suppliers, you debts will continue to grow and without a suitable solution, this will leave you in an even worse financial position.
Negative cash flow will make it impossible to invest in your company without external funding, such as pursuing a growth strategy or upgrading equipment. It will also cause difficulties when covering unexpected costs or filling cash gaps (such as a temporary fall in sales). This is all while eating in your cash reserves, if any.
If cash flow issues aren’t rectified, it will most likely lead to the closure of the business – either from debt or an inability to operate.
Previous article | Next article