Cash flow is simply the funds, cash, and cash equivalents, that are “flowing” or moving in and out of a business. Having a positive cash flow makes the company “liquid” and able to pay its bills and continue operations.

Why is Positive Cash Flow Important?

Positive cash flow, as reflected in the cash flow statement:

Shows that a company is adding to its financial reserves thereby enabling it to reinvest in the company, settle debt payments, and pay out funds to its shareholders.
Enables a company to purchase inventory and pay payroll and operating expenses, and marketing expenses.
Enables a company to not just survive but to grow and improve the business.

How to Effectively Manage Cash Flow

Cash flow management requires three fundamental things. First keeping detailed and accurate records so that you know your cash position. Second, understanding and utilizing the cash flow statement. And third, developing a useful cash flow forecast.

Here are some useful cash flow management tactics:

Manage expenses carefully, cutting or delaying some expenses as necessary.
Minimize accounts payable by requesting more favorable payment terms from vendors.
Use purchase order financing to fulfill purchase orders.
Set clear customer payment terms to avoid slow or non-payment. Also, find ways to get customers to pay faster including early pay discounts. Send out invoices immediately.
Ask customers for a deposit or milestone payments on large orders.
Increase margins, either by taking a price increase or by finding ways to decrease costs.
Sell or lease idle or obsolete equipment.
Secure a merchant cash advance—a portion of credit and debit card transactions.
Sell invoices via invoice factoring to secure increased revenue.
Know when to lease and when to buy.

Seek Expert Financial Assistance

Contact Navigate Firm to secure the funding you need to meet your financial goals. Navigate Firm based in Pensacola, FL offers a vast portfolio of financing options to attain and sustain business growth. Our experienced professionals can help small and large businesses of all sizes.