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Cash is king!
For any company to survive, cash flow is the single most important factor of financial success. In fact, poor cash management is the leading cause of why many businesses go bankrupt. So, when we say cash is king, we mean just that.
Maintaining a positive cash flow is at the core of a strong business model. A company can report excellent revenue and reasonable expenses and still fall short on cash flow-rendering it unable to meet even fixed monthly costs such as rent, utilities and payroll. Consider a few top reasons why cash flow is so important to your success ... why it is king!
Paying monthly expenses in a timely manner
A business requires a positive cash flow to simply cover basic monthly expenses. Paying fixed costs like rent and utilities is a priority for obvious reasons. but also consider that paying expenses in a timely manner saves you from added late fees and penalties that slowly eat away at your cash pool.
Surviving lean months
Every business can experience leaner periods. Smart business owners are always looking ahead and preparing for months where business (and cash flow) might be a bit lighter. Maintaining a strong cash flow will help you get through these periods. If you operate a seasonal business. it becomes even more important to plan ahead and maintain a strong cash flow to get you through leaner periods.
Investing in capital expenditures
To grow, some businesses may need to invest in larger expenditures such as real estate. warehouse space, machinery or technology. These are typically one-time costs that require significant funds. Without cash on hand, it's difficult (if not impossible) to invest in capital expenditures that can bolster business growth.
Acquiring other businesses
Acquisitions are a common way for a company to expand operations or branch out into new marketspaces. Having a positive cash flow allows businesses to comfortably acquire other entities and exponentially increase growth potential.
Preparing for an emergency
Having an emergency fund for unexpected costs is just good planning. Such a fund can cover legal fees and other costs associated with such things as natural disasters or cybersecurity breaches.
These are just a few reasons why cash flow should always be top of mind in your business. Maintaining a positive cash flow position helps ensure the sustainability and success of your enterprise! ■Back to issue