The secret to success is 'cashflow' and it's much easier to get a handle on that you expect.
What is Cashflow?
Simply, the flow of cash through your business – it is the process of collecting, disbursing and accumulating cash. It can be positive – you are able to pay your business costs when they are due and to have some left over OR…It can be negative – you simply do not have enough cash from your business trading to meet your business costs – this means that you need to borrow or contribute personal funds.
The Difference Between Profit and Cashflow
Why do profitable businesses go broke? Because they have not managed their cashflow well – their profit is tied up in stock, Work In Progress (what you need to produce your products), debtors (customers who haven’t paid yet but have your stock), or capital expenditure (equipment, cars, computers etc).
Sales are not converted to cash in time to pay creditors, the tax office or loans. Businesses often don’t take into account their cashflow before making capital purchases (equipment etc that has to be paid for before you use it within the business).
In this economic environment we need to:
Creating Robust Cashflows
Let’s have a look at some of the facets of our businesses which we should be reviewing so we can create robust and health cashflows:
The “Cashflow Cycle”
This is a typical example of the Cashflow Cycle.
It may seem on the surface that a service or a professional business is not affected to the same degree that a retail or manufacturing business may do, but ALL business are impacted by the gap between investing in the product or service for resale and the receipt of payment.
Each business will have its own variations that will have an impact on the end result.
During challenging economic times we find the following occurring that create cashflow potholes:
9 Tips for Create Positive Cashflow
So to make cashflow a positive element in your business and take a bundle of stressful elements away, here are nine great tips for making sure you have a healthy and robust cashflow: