Maintaining Positive Cash Flow

Knowing that your business has positive cash flow is great news. But, how do you maintain that positive cash flow balance to ensure that you don’t lose it or go back into a state of financial setback? 

Whether you’re running an established business or a maintaining positive cash flow is essential to ensuring long term success. Positive cash flow in a business is a good indication of current performance and as an accounting professional, I always recommend clients to regularly review their business’ cash flow statement so that we can take the necessary steps to prevent negative cash flow. To help you get a step further with this, I’ve put together a list of 5 tips for maintaining positive cash flow in your business.

1. Keep the cash flowing

There are several things a business can do to ensure positive cash flow. Depending on the type of business you run, it may be worthwhile to offer incentives to clients for prompt payment. This helps you generate more cash flow and keeps the business going 

You also need to make sure that you are making sales consistently to receive the money that will keep your company running. It all comes down to the numbers. Look at the target amount of income you want to receive each month.

2. Spend Wisely

When starting a new business, it can be tempting to invest all of your money straight away to ensure your company gets up and running. It’s wiser to resist this urge, however, because the ultimate success of your business relies on the ability to perform long term. If you funnel all of your money into its launch you place your business in a vulnerable position later on when an unforeseen expense emerges. 

To maintain positive cash flow when starting a new company I would advise you to spend wisely and set aside a portion of your money for future expenses.

3. Set Up a Line of Credit

One mistake to void is to wait until your time of need to run to the bank for a line of credit application. Instead of trying to overcome the problem at the last minute, it’s better to set up the line of credit when you have positive cash flow, and your business is doing well.

 During this application process, the financial institution will run a complete check on your financial records to determine whether you will be approved for the line of credit. They want to be sure that you will have the cash to pay back the loan, and this information will also affect the loan limits. 

Securing the line of credit right now could be the difference between keeping your company going in the future vs. not being able to pay your bills because of cash flow issues.

4. Keeping up with Accounting and Bookkeeping

The foundation of an effective system for cash flow management should be based on the right bookkeeping and accounting strategies. You need to track the transactions that are moving in and out of your bank accounts. 

Instead of stretching yourself thin with too many responsibilities, consider the benefit of bringing in a good outsourced accounting team. These services will improve your financial systems and help you avoid potential cash flow issues. Working with an experienced financial team is one of the best things that you can do to support your business goals.

5. Avoid Late Fees

Provided your cash flow is healthy, you can save yourself a lot of money on late fees by paying your bills/payables on time. Not only do late payments have an effect on your cash flow but, in the case of credit card fees, they impact your credit rating and help you to accrue credit card interest. 

One possible solution to avoid late fees is to outsource your payroll using trusted accounting services providers. 

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