Cash flow is the lifeblood of any business. Understanding your cash flow requires understanding your numbers.
If you don’t know your numbers, you don’t know your business.
Make sure your business has a steady flow of cash. Don’t let your bank account become too low.
A business can’t buy stock and pay for salaries and other expenses on time if it doesn’t have enough cash on hand, so managing cash flow is crucial.
Here is a basic principle that may save you cash flow headaches:
Buy low, sell high, collect early, and pay late.
Buy your stock at low prices. [negotiate for discounts]
Sell your offerings at high price. [this will ensure a healthy profit margin]
Collect early from your customers. [offer early settlement discounts if needs be]
Negotiate to pay your suppliers later [without incurring interest and penalties on your overdue account]
Ensure your taxes are up to date.
The way to know and improve your cash flow is to have proper bookkeeping, if you can’t measure it, you can’t improve.
Whatever happens, the golden rule is don’t run out of cash in your business!