Why Cash Flow Is One of the Most Important Financials in a Business
One of the crucial factors in assessing the well-being of your business is cash flow. If from one financial period to another you bring in more cash than you dispense, your company’s cash flow is positive, while if more cash goes out than comes in, the cash flow is negative.
Here are some of the reasons why maintaining strong positive cash flow is integral to business success.
Strong cash flow stabilizes your company and gives you greater purchasing power. You are protected from mishaps such as foreclosures and defaults. Remember that the measure of cash flow is not the amount of cash you have on hand at any one time, but rather the continual generation of cash to meet all your needs.
When your business has steady cash flow, you are better able to make financial decisions, plan for growth, and handle emergencies. For instance, you have the freedom to lure in new customers with favorable credit terms, purchase needed supplies and equipment, and satisfy owners and shareholders by paying out dividends. You can also more easily impress lenders if you want to take out a loan.
Achieving strong cash flow allows your business to become proactive in implementing growth strategies. This may include upgrading technology, providing training for employees, researching and developing new products and services, and expanding to further locations.
Pay Off Debt
The only way to maintain a top business credit score while handling company debt is with strong and steady cash flow. When you have credit accounts with suppliers and commit to long-term loans, you need to meet your payments each month. The only way to do this is to ensure that your present positive cash flow continues on into the future.
For more advice on maintaining strong cash flow for your business, get in touch with Fintrus.