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Many new businesses go under not because people don’t like their product or service, but because they have problems managing their cash flow. The large amount of working capital they started the month with disappears and no one seems to know where or why. If your company is struggling with keeping positive cash flow, here is the prescription to cure your financial woes.

Track Every Cent
With so many transactions occurring every month, a tracking system is essential to figuring out what is happening to your cash flow. A sale can take weeks to months before payment is made, and you can make business expenditures without having them show up for a month on your business credit card. Tracking every cent your company pays or receives is the first step to making sure cash flow is on the right track.

Make Specific Cash Flow Goals
Once you have a tracking system in place, you can then look at specific metrics to make goals to ensure there is enough working capital at the end of every month. Pay attention to the number of days you wait to receive payment from any invoice, how long your inventory sits on the shelves before being sold, and how long you have to wait before repaying your vendors. Make goals for each of these categories and adjust your operations monthly according to your plan.

Plan for Delayed Accounts Receivable
As you see any gaps in cash flow, you can plan to stretch your working capital through those periods. For example, if you sell goods or services to other businesses, the invoices are typically not due for at least 30 days and some business transactions can take several months. That means you must know how your business will provide for funding during that months-long wait. Also, inventory can drain your cash flow quickly. Trying to keep only a necessary amount of inventory on hand can help ease your cash flow problems.

Manage Growth Carefully
While growth is very exciting for every business, it can come with fiscal growing pains. Trying to come up with a ton of new inventory or hire several new employees in a short amount of time can deplete your working capital, leaving you short on cash for months at a time. Make a plan for growing your business, complete with ideas of how to fund your operations while scaling up.

There will always be unexpected financial windfalls and blows in the business world, but making and following a solid cash flow plan will help your company better weather those storms.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources