How To Maintain A Positive Cash Flow

How To Maintain A Positive Cash Flow

Setting up and running a business is a mammoth task, irrespective of the scale of your organization. If you want to thrive in a market full of competition and lead your business towards prosperity, it is important to maintain a positive cash flow. A positive cash flow allows you to manage your finances well and maintain a good bank balance for your company.

Especially if you run a small business or a startup, a positive cash flow would help you be prepared for the times when you may need emergency funds. Whether your sales targets are not met, you need to tap a lucrative opportunity or pay your debts, positive cash flow would also provide you with enough financial backing for your business.

Here are some important ways in which you can maintain a positive cash flow:

Budget Your Cash Flow

To ensure a steady and positive cash flow, it is important to budget the same and monitor every cash inflow and outflow. In the age of digitization, businesses can use automated software for calculating cash flow and monitoring the same. All you need to do is keep track of your net cash flow on a monthly basis.

Throughout the month, keep listing all cash inflows that increased the bank balance of your business. From this amount, deduct the total of all cash outflows to get the net cash flow of that month. This will inform you if your cash flow is negative or positive. Once you know the financial standing of your business, you can maintain a positive cash flow for the months to come.

Keep A Check On Business Expenses

Just like managing your personal finances, it is important to keep the spending of your business in check. In simple terms, reducing cash outflow would automatically improve your cash flow over time. Keep track of every expense due and incurred, avoiding spending money where it is not required.

Here are some important ways in which you can reduce your business expenses to maintain a positive cash flow:

•                    Keep negotiating your contracts with suppliers, partners, or contractors on a regular basis. Make sure you get a deal where you spend a minimum.

•                    Make a good assessment before you finalize a lender to borrow from. Getting a better deal would reduce your expenses.

•                    Review your insurance policies on a regular basis and make sure you are not doubling up on the premiums paid.

•                    Hire contractors instead of in-house employees wherever possible.

•                    Try saving the money spent on paying interest by paying off loans early (unless the lender charges for early repayment).

Try Boosting Your Cash Inflow Wherever Possible

One of the most practical ways of maintaining a positive cash flow is by increasing your cash inflow. Keep finding ways of boosting your cash inflow to provide your business with better financial security.

There are many different ways in which you can increase the inflow of cash. If you believe that your customers are ready to pay more, you can always increase the prices of your offerings. Start a sales promotion campaign to attract more customers and make more sales. Find lucrative investment vehicles that provide you with good returns while keeping your money safe.

When you try boosting your cash inflow, you would be better prepared for unforeseen financial crises and deal with your expenses wisely.

Charge Penalties For Late Payments

Late payments from debtors often disrupt cash flows to a great extent. To cover for this mishap, it is advisable to charge penalties for the payments you receive after the due dates. Accepting late payments without charging your debtors would only repeat such instances in the future. Penalizing your debtors would not only help you balance your cash flow but also provide your debtors with the incentive to pay on time.

However, if a debtor is consistent in making late payments, it is only wise to end your association with them.

Make More Money By Providing Premium Offerings

Once you have established your brand and created your niche in the market, you can start providing your customers with premium products or services at higher prices. If you have been able to maintain a positive image and reputation of your brand, it would not be difficult to get the traction you are looking for to provide premium offerings. This would increase your overall revenue, leading to a positive cash flow.

Consider Providing Memberships

Providing memberships is one of the most fruitful revenue models in 2022. This ensures a steady flow of income, irrespective of the market forces you deal with. While conventional sales are rarely recurring and do not assure you of your revenue, the membership model gives you a good amount of assurance regarding your cash inflow.

However, just like offering premium products and services to your customers, memberships would work only if you have been successful in building a strong brand and have developed a loyal base of customers.

Get On The Digital Bandwagon

Another important way of increasing and maintaining a positive cash flow is by increasing the overall productivity of your organization. We live in an age where it has almost become mandatory for organizations to embrace digitization to thrive in the market.

Implementing digital solutions allows you to increase your productivity with minimum effort. Based on your needs and preferences, you can automate a range of your sales, marketing, accounting, HR and administrative processes by implementing automated software platforms. These platforms prevent your team members from spending their time and efforts in carrying out repetitive processes, leading to better engagement and productivity.

When the productivity of your company increases steadily, it would automatically increase the inflow of cash, helping you maintain a positive cash flow.

The Final Word

These were some of the most important ways in which you can maintain a positive cash flow for your business. Especially if you run a new and growing business, smart financial management and accounting practices would help you establish your venture effectively.

Post Submitted by: John Martin <teammainco@gmail.com>