Behind every successful business is positive cash flow.
It is a longstanding key performance indicator that is somehow synonymous with long-term success and higher levels of business performance these days.
What is a cash flow in the first place?
Commonly referred to as the lifeblood of any business, cash flow is simply defined as the net amount of money that goes into and comes out of your business. In other words, it is the amount of cash a business has at the start of an accounting period and at the end of it.
In regards to positivity, cash flow is basically determined as positive if a company’s end figure is higher than the start figure itself. On the other hand, if a business’s starting amount is greater than its ending amount, then its cash flow is negative. Cash flows are indicative of your business properly using its available funds to conduct its regular operations. These include various signs, such as:
- Cleared debts
- Increased assets
- Widely available capital for growth and development
- A capacity to accommodate future financial challenges
- Fairly-paid workers
With positive cash flow, it’s safe to assume that your business is doing well because it affirms that your funding is moving in a way that can keep everything running smoothly. Given all this talk about positive cash flow, you may be asking: “How can I achieve and maintain a positive cash flow in my business?”
Attaining a positive cash flow, made easy
As difficult as it may sound to keep your business’s finances in the green, achieving a positive cash flow can be a whole lot easier than it sounds. To ensure that your business starts off the new year on the right note and is ready to grow right into something bigger by the end of 2020, here are a few ways to keep your cash flow positive all year-round:
#1: Keep a close eye on your business’s expenses
One of the easiest ways to keep your business’s cash flow positive is to inspect its cash flow as often as possible so that you know where the cash is being spent. For instance, if you’re a hairdresser that’s taking on a larger amount of clients for Valentine’s Day, then it’s essential to look at how much is being spent on shampoo, hair dye, extensions, and treatments.
While they may seem like menial costs at first, the expenses your business incurs will make a significant dent in your cash flow and pull it down if you don’t inspect it closely to ensure that money is going where it should be.
#2: Offer incentives for early payment
Another way to keep your cash flow on the green side is to entice your customers into paying on time with various incentives that they can’t resist to settle their accounts diligently. This may not exactly work with upfront payment businesses like gym memberships and e-commerce stores, but this is a perfect tip that works well with companies that use larger-sum payments, such as retail establishments and tech companies. Once you’ve made an offer that businesses can’t refuse, you won’t have to worry about chasing after delayed payments in order to keep your cash flow up since they’ll be paid as soon as possible.
#3: Use technology to your advantage
Regardless of whether you’re a startup, a gym, e-commerce or retail business, you can always benefit greatly from the use of technology to manage your cash flow, especially when it comes to using accounting software. Through the use of accounting software, you’ll be able to exhibit a greater level of control on your business’s cash flow with real-time data, accurate reports, and quick managing function. Accounting software is best used as an informational aid that can ease the process of making better business decisions that will keep your finances on top.
Pushing your business to achieve a positive cash flow is essentially a leap towards having a more successful operation overall. By taking into mind the tips mentioned above, you’ll be able to boost your business’s cash flow this 2020.
We understand running a small business is complicated. Your financials shouldn’t be. Take the guesswork out of the accounting and let us help you build your blueprint for success.
Contact us today for your free assessment to find out how Blueprint Accounting can support your business.