The importance of Cash Flow when starting, running & growing a successful business.

Ask-Her Tax + Bookkeeping Inc.
January 3, 2022

The lack of Cash Flow is one of the biggest reasons a small business fails.

The lack of cash, either going out or coming in, as we all very well know, will shut you down faster than anything.

It is most difficult dealing with cash flow issues when you're starting a business and even though it seems at times your cash is only moving out of your business, it must eventually flow both ways.

There are many costly expenses that are depleting your funds fast. Especially with not having any sales or customers who are paying you. More often than not, you will need another source of cash to get you started.

Applying for a temporary line of credit is a helpful and satisfactory solution. This will not only get you going, but also placing you in a positive cash flow situation and start you on your path to your business's financial success.

The first six to eight months are a crucial time for cash flow. Having not enough cash to pull you through limits your success rate, and suppliers frown on giving credit to new businesses. Not to mention your customers may want to pay on credit. This type of scenario would put you in a cash flow crunch that will prove difficult to deal with.

One terrific way of avoiding this is to keep a close eye on your accounts receivable/ accounts payable and control inventory just to name a few.

It is also a clever idea to run a cash flow report. This report will tell you the cash you have received and total of your expenses that you paid out, showing your business's cash position thus helping you better navigate what steps you need to take to continue your progress.

There are 3 types of Cash Flow:

1. Financing - Applying for help could be a necessary step to starting off your cash flow in a positive position.

2. Operating - Running your business and nurturing your brand. A company with a great reputation will have a much easier time maintaining positive Cash Flow!

3. Investing -  Whether renovating, bringing in new products, offering new services, marketing, hiring etc. all of these things will help you to grow your business and increase your cash flow.

Are you starting a new business or just need help understanding how to manage your cash flow? We are here to help. Just Ask-Her!

Thank you; Milgwetch