CASH FLOW – What is That?

I am sure you have heard the term “Cash is King”. This is true. Those with cash have stronger buying and/or borrowing power than those without it. With today’s lagging economy, many businesses are experiencing negative cash flow. The business owner who has yet to get up close and personal with their cash flow issues will see their doors close sooner than later. Insufficient cash flow creates a lot of stress on the entrepreneur, can cause business setbacks and personnel issues. It can also impact the quality of goods or services offered to customers.

If you are experiencing negative cash flow, you must complete a comprehensive assessment of your situation. There is no room for procrastination or this will be detrimental to your business survival. In this assessment you will want to ask some really tough questions and answer them effectively. Here is a sampling of questions to consider:

*Where is the business lacking?
*How much money are you losing?
*What are the current drawbacks?
*Did you expand too quickly?
*Did you borrow more money than you needed?
*Can the business sustain its current course of action?
*If you have to make adjustments, where should you start first?

The above list of questions should be used to guide and better aid your attempt at cleaning up your cash flow mess. With this assessment, you should be able to create some concrete solutions for increasing your bottom-line. Taking a proactive approach to solving these issues will give you the boost you need to take the necessary steps to implement applicable solutions.

Knowing your business cash flow position will help to keep you on track. Implementing strategic measures to survive market downturns and increased growth will define whether your business is here today or gone tomorrow.

In your business strategic survival plan, you should consider this – diversification. This concept is applicable to any business. Diversification is critical to moving any business through growth or survival periods.

When using diversification to deal with negative cash flow, here are three (3) core areas to consider:

1. Do business with at least two (2) of the following: Business-to-Government (B2G), Business-to-Business (B2B) or Business-to-Consumer (B2C). If your business is only concentrated on one category, you could potentially be losing sales and contracting opportunities.

2. Managing your “Cash-In” and “Cash-Out” budget. Monitoring how every dollar comes in to the company and how it is spent should give you some clear indications as to where you can improve. For instance, monitoring your outstanding accounts receivable, asking for partial payment upfront, accepting credit cards for payments or paying your bills on day 20 instead of day 1, will improve your cash position.

3. Leverage is a concept that is often over looked, especially in small businesses. Using leverage with your assets, connections or any other resources available can make a difference.

It can be demoralizing to a business owner when they are experiencing insufficient cash flow. If the issues are not addresses early on, this will negatively affect your staff and customers. Take action today to stem the cash hemorrhage affecting your business financial position. It cannot wait.