Cash Flow

Without healthy cash flow, your business will run out of money. It’s really that simple. Too many expenses and not enough money coming into your business to cover them all will lead your business into very big problems, very quickly. If it is unable to cover expenses then it is unable to operate. If there’s no money left after expenses then there is no money to look for more opportunities and keep your business competitive within your market.

Your cash flow statement is the at-a-glance guide to health of your business. It shows the amount of money coming into your business accounts versus the expenses going out and the total at the bottom is the net cash flow you have left over, or the shortage you may be carrying month to month.

Free cash flow is the money you have left over after all expenses to reserve for seizing new opportunities. It is the money free of all other financial constraints which you can use for innovating and staying competitive.

Cash flow is, basically, the money your business has on hand. It is not calculated to include the price of any assets your business possesses. It is simply the money sitting in your business accounts which your business is able to draw on.

Cash flow is calculated by measuring what money the business has on hand minus any business expenses that need to be paid. These expenses may include rent on your premises, payroll obligations, vendor invoices you need to pay, etc. Your cash flow is the money left in your accounts – or not, depending on the health of your business – after all financial obligations are paid. It does not include the value of any assets on hand, no matter how quickly they can be liquidated.

Your cash flow ratio is the measurement of cash coming in versus the amount of cash going out again. If your business is struggling to pay vendors, keep up with payroll demands or unable to splash out on a new line of stock, then it might pay to take a closer look at the health of your cash flow ratio and think about ways you can improve it.

A rolling line of credit or overdraft is a great, simple way of ensuring you leave a buffer of funds you can draw on only when you need to to cover costs and protect your net cash flow.

This will also protect your assets and stop you from having to liquidate them to maintain your cash on hand.

Prospa provides finance options to help businesses build and grow and that means helping to maintain the cash you have on hand, not cripple potential areas for expansion before you can capitalise on them.

Often small business owners don’t pay as much attention to accounts payable and accounts receivable as they should. When you’re running a business, you’re often on the front line and you may not have the administration support that other, larger businesses can afford.

Developing a strong and easy accounts reconciliation process is absolutely vital to the smooth and healthy running of any business. Chasing up invoices and getting your creditors paid on time will keep your accounts nice and easy to maintain.

Clean accounts make it simple to isolate potential opportunities and avoid potential problems, such as poor cash flow. Prospa provides funding solutions to help businesses of all kinds and sizes to seize the opportunities. If you want to build and strengthen your business prospects and maintain simple, straight-forward account keeping procedures and healthy business financials, talk to Prospa.

Is your business struggling to stay up to date with old equipment? Are you looking to invest in new capital and shift your business up a gear? We can help you to assess your working capital and help find opportunities for liquidity to boost your short-term cash flow and build long-term success.