A poor understanding of cash flow and poor management thereof has contributed to 82% of the business failures in the U.S. As one of the key business levers, the importance of good cash flow management cannot be understated. Once a business owner is able to determine where the cash flow problem takes place, it’s simply a cash injection away from progress. Here are a few simple ways to improve cash flow in a business.
Free Up Unnecessary Spending
As in households, the minute the cash flow gets a bit tight, the luxuries need to go. The same goes for businesses as well. One of the best ways to do this is to stop buying stock that sits on the floor for too long or has a high risk of spoilage. Once stock management is under control, it’s time to look at redundant equipment. Selling the equipment could be a generous boost to the cash flow. When purchasing new equipment, it’s important to see the potential it has to generate an income.
A Personal Injection From the Owner
Business owners are often required to use their own funds to make the business run a little more smoothly. This amount is recorded on the balance sheet and when things go better some business owners draw these funds back to repay themselves. A healthy injection from the owner is always a good sign to outside investors as well. One of the fastest ways for a business owner to inject cash into the business is with a personal loan. As can be seen from this Norwegian example, business owners can have a number of different options from the comfort of their own homes, and have access to the funds in no time.
An Outside Investor
An SBA loan is a good choice for those who meet the necessary criteria to approach the Small Business Administration. Other investment options include approaching potential partners directly, or even looking to crowdfunding for specific projects. Some of these injections need to be repaid, but in the event of crowdfunding other ways of repayment are generally accepted, for instance, products or special edition items.
As a business owner, cash flow should be the first thing they look at in the morning and the last thing they see before they close for the day. A quick course in cash flow management is a worthy investment in the business that will undoubtedly take it to the next level.
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