Why Cashflow is King when you Run a Successful Business

shutterstock_167489696Running a business is no easy task, and you need to have your wits about you at all times to make the right decisions, handle any urgent situations and design policies keeping recent trends in mind. Errors and oversights can cost you a tidy sum of money. What every business needs is a sound financial plan that increases the chances of assured success by keeping a sharp control on financial activities and accounts.

First always make sure that you are on top of all the accounts that relate to your business’s finances and how different income and expense streams can work together to maintain a smooth cashflow.

In fact poor cashflow management is one of the primary causes of business failure. Perfectly viable businesses can and do fail because they do not keep on top of their numbers.  Here are some other areas to look out for:

Inventory and Logistics

Are you in the manufacturing business? Do you supply goods from one place to the other or introduce a finished product into the market? This means that you have to keep a sharp eye on your inventory and the overall logistics cost, so that your expenses remain in control.

Stock-piling is usually pointless. Storage costs dear and fashions and trends change fast, meaning that your stock will be losing value at the same rate.

Transportation costs can easily get out of control. Review the options. If you only need to transport occasionally, courier services may be more cost efficient. And you can also save a considerable amount by using a smaller, more fuel efficient professional van, like the Fiat Scudo.

The key is to strip inventory and logistics right down to whatever is essential. Make sure that you have an adequate stock of critical materials and cut everything else down to the bone. Do you need to keep stock at all? Perhaps your orders could be fulfilled directly by the manufacturers or by a third party like Amazon?

Credits and Loans

Be realistic about when you expect to receive payments for goods and services.  It’s appalling, but not unheard of, for large companies in particular to pay up to 6 months in arrears. Can your business cope? Make sure that you flag up any potential late payments to your bank well in advance and that you are prepared in terms of an overdraft, loan or asset-based financing. If financing isn’t available, heart-breaking as it can seem, you may have to turn that big order down. Otherwise your business will run out of money and go bust.

Business Expenses and Operating Costs

Don’t overlook any costs. Review every expense line for potential savings and trends. New technology is constantly introducing efficiencies and savings for businesses of all sizes. Are you up to date? Could putting your event or financial management online be saving time and money? From your utilities to salaries to maintenance expenses; all of it needs to be managed with a firm hand.

If you want to run your business successfully then you need to get on top of cashflow management without delay. Start by sorting out the areas mentioned above and then regularly follow up on them to keep your business one step ahead.

 

 

 

 

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