Managing Business Cash Flow Tips   by Mick

Even a profitable business can fail without good cash flow - especially if it is one that is growing quickly. Cash flow is necessary to pay bills on time, keep a positive credit rating and make the most of profit opportunities. A poor cash flow is often experienced by those businesses that must wait to be paid for their services, rather than one with daily cash takings.To prevent disaster, a manager should have three budgets. One for high sales, one for medium sales and honest expenses and the third for low sales and high expenses. A sudden sharp drop in sales should be the key to switch to the third one. You need to accurately predict how much cash will be needed during the financial year, taking into account annual expenses such as insurances.

Don’t spend cash on non-essentials such as fancy furniture and if certain products are losing money, then stop selling them. A simple way to be sure of sufficient cash flow is to insist on cash on delivery (COD). Your customers will understand if you explain that your business cannot afford to carry them for 30 days or longer.

Another way to achieve cash flow is to forgo your own salary. Insisting on a high salary when you don’t even know the financial state of your business is a recipe for disaster. You could also sub contract instead of hiring new employees, lease rather than buy and learn to recycle stuff such as packing boxes that you can use again.