Everyone dreams for financial security and one way to achieve it is to increase positive cash flow and decreasing negative cash. Negative cash represents more expenditure than any business earns, and it can kick any business or individual into a disaster. Cash is a king, and its flow keeps its kingdom warm and alive. Many small and average sized businesses majorly rely on cash flow. Appropriate handling to manage cash flow is inevitable to impart success to the business and more importantly to fall victim to bankruptcy.
Profit does not Equal Cash Flow
Capital expenditures, accounts payables, and receivables, inventories, debt services are the factors that affect cash flow. Profit only does not indicate the total cash flow, and laser focus is required to analyse all these contributing factors drivers of circulating cash with an overall estimate of profit and loss. Often, to grow the business, people need to make huge investments to receive larger revenues and higher profits that put a huge strain on cash. These steps require proper cash management to meet up the demands of successful business and to monitor that expenses meet up earnings.
Regulate your Cash and Fix What Went Wrong
Concrete steps to monitor your cash flow and particularly doing the predictive analysis to realize and understand pros and cons of any investment can be fruitful to turn a negative cash flow in a positive one.
- Tightening Credit Requirements
Risk analysis to extend credits to the customers beforehand can be significant for a growing or establishing a business. Survey of the potential customers and their feedback for credit application can give an analysis that in which type of scenario consumers are. Questions like whether customers will be paying their bills in time or are they facing issues in cash flow can make the cash flow easy and less frightening.
- Analysis of Expanses to Slash Costs
To figure out that what inevitable expense are and what expenses can really be avoided will be an extremely positive step towards optimization of negative cash flow. Almost every business has a margin to cut off some unnecessary expenditure that can reduce the differentiating cash flow.
- Take Every Member On Board
The best effort to combat negative cash flow issue is to take every employee on board and guiding them to increase sales focusing on generating revenues and cutting down expenses as much as they can.
Tracking your negative cash every month and focus on increasing the positive flow can be beneficial strategies.