Cash flow is the lifeblood of any business. It is the movement of cash in and out of a business, and it is crucial for the survival and growth of a business. However, cash flow only becomes a problem when outflows exceed inflows.
Cash flow issues can arise from poor cost management, collection issues, and excess inventory or even overlooking miscellaneous costs. In this blog post, we will discuss how to optimise resources to prevent cash flow issues.
By identifying costs accurately, you can ensure that you are not overspending on unnecessary expenses and are allocating resources effectively.
Sales forecasts are critical for identifying not only costs but also inflows of sales. By forecasting sales, you can plan and allocate resources effectively, and reduce the risk of cash flow issues.
By identifying potential risks, you are better positioned to develop strategies that can mitigate their impact and reduce the risk of future cash flow issues. Conduct a risk assessment and establish emergency funds to give yourself a business buffer.
This is a common mistake made by new and smaller businesses. It can lead to cash flow distress without you realising it. It is important to keep personal and business finances separate and to ensure that there is a clear understanding of how much money is available for business operations.
By monitoring inventory, you can avoid wastage and ensure that you have the right amount of inventory on hand to meet demand. This will reduce the risk of cash flow issues.
Having a cash reserve buffer can help you weather unexpected expenses or fluctuations in cash flow. A good rule of thumb is to have at least three months of cash reserves on hand.
By reducing cash outflow and identifying fluctuations that will affect the business, you can take corrective action before the situation becomes critical.
Short-term financing can provide a quick and effective solution to cash flow issues, ensuring that you have the resources you need to keep your business running smoothly.
Optimising resources is critical to preventing cash flow issues. By effectively managing cash flow through the steps outlined above, you can ensure that your business has the necessary resources to not only survive but also thrive.
Looking to boost your business's cash on hand? With CardUp, you can make various types of payments using your credit card, including:
If you are in need of short-term financing, consider exploring options such as Funding Societies. They can provide a quick and reliable solution to cash flow issues, ensuring that you have the resources you need to keep your business running smoothly. To learn more about their financing solutions and how they can help your business, click here to learn more.
The above content is adapted from Funding Societies's webinar session at the CardUp's SME Healthweek 2023 webinar series: From Surviving to Thriving, tailored for SMEs and entrepreneurs covering all topic from finance, hr, marketing to globalisation.