The money flowing in and out of a business, also known as business cash flow, is like the lifeblood of a business. Many business owners report cash flow as one of their main concerns. In fact, studies show that more than 60% of small businesses in Australia stop operating within the first three years, and many of these failures are due to poor management and inadequate business cash flow.
A healthy balance sheet relies on a constant stream of cash coming into the business to maintain positive cash flow so that bills can be paid. Because not all businesses have a sizeable cash reserve to use as working capital, business cash flow often relies primarily on staying on top of accounts receivable. When business cash flow is disrupted, many businesses experience stress.
Maintaining a positive cash position relies on having an effective accounting system in place. This includes decent accounting software that provides access to a cash flow statement so the business owner can conduct an analysis of the business’s financial position over the short term and long term. It also allows the business owner to plan ahead for growth, setting targets and monitoring company performance, and being comfortable with risk management.
Find out more about how to overcome business cash flow crunch in this article.
If you’re looking for a handy way to support all different types of cash flow fluctuation, the Prospa Business Line of Credit can help with ongoing access to funds (up to an approved limit) that you can use and reuse as often as you need to.
Alternatively, talk to us about a Small Business Loan if you need a lump sum of $5K to $300K.
Flexible, ongoing access to funds for working capital to cover unexpected cash flow gaps.
Borrow up to $300K with 10 minute application, fast decision and funding possible in 24 hours
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Day to day expenses in a business are unavoidable. They include things like: staff wages, rent, utilities, phone, computer expenses, maintaining equipment, vehicles and machinery, furniture, insurances, office supplies, professional service fees, loan/lease payments, advertising and marketing costs, association fees, travel expenses, tax expenses and more.
Without the necessary working capital to cover these expenses a business can fall behind. So it’s incredibly important to stay on top of the numbers and keep an eye on what’s coming.
There are plenty of tools available to help, but why not start with this free cash flow forecast template. This ready-made spreadsheet will help you stay on top of your business cash flow and find out where your finances might need a boost.
If money flowing out of your business is faster than money flowing in, you need to take action. There are a number of things you can do in the short term that will make an almost immediate difference:
This article describes some of the common cash flow mistakes business owners should try to avoid.
Growing your business is a longer term solution that can contribute to increased business cash flow. Business growth doesn’t necessarily mean a bigger premises or more customers, it can be as simple as making a small but significant change to existing processes. For instance you could update your website more often, invest in an online booking system, employ a good small business accountant, add a couple of extra tables to your restaurant, open longer hours, do a sales promotion or some marketing for your product or service, or even offer a discount for bigger orders.
This article explores some ideas about how as a small business owner you can grow your business and increase cash flow.
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