• Luke Loescher

What is cash flow and why does it matter for small businesses?

Updated: Aug 1, 2021

Cash flow is an important aspect of business because without it, a company can fall into the red. Cash flow is defined as the amount of cash that comes in minus the amount of cash that goes out during a given period. It’s difficult to measure but easy to understand how important it is.

In this blog post, we will define what cash flow means and discuss some ways you can increase your own business' cash flow so you don't end up like those 82 percent of small businesses who failed due to poor management!

What is cash flow?

Cash flow is the movement of cash into and out of a business.

How can you measure cash flow in your business?

Cash flow can be measured by tracking cash coming in and going out of the company over a period. This is done through journal entries or various accounting software programs that track this data for you automatically.

How can a business increase their cash flow?

Increasing your cash flow means getting more money flowing to your business so it’s important to spend less than what comes in - especially when times get tough. In order to increase cash flow, there are two main things you need: better management skills and a real plan with achievable goals!

Tips for increasing cash flow:

  • Make sure that all bills, taxes, wages etc. are paid as quickly as possible so that there will be more money flowing through the company (i.e., don’t wait until payday). If you have trouble managing expenses without using credit cards or taking loans from family members try getting help from an experienced professional who specializes in helping companies get past their financial difficulties. For example, some advisors offer services on retainer while others charge a percentage of the company’s revenue.

  • Make sure that you are not overpaying for services because this is leading to cash flow problems (i.e., don’t pay more than what other companies in your area charge).

  • Work on marketing, both online and off line to bring new customers into the door. If potential buyers see how successful your business seems they will be more likely to purchase from you instead of going elsewhere!

These are three awesome tips on increasing the cash flow for your business.

In this post, we learned what cash flow is and how it can help a business stay on track for success.

In summary, our three tips for increasing the cash flow for your business are: make sure you’re not overpaying, work on marketing both online and off line to bring new customers in the door, and lastly make sure that all bills are paid as quickly as possible!

If you want to make your business thrive and be profitable, then let Spectral Accounting help! Schedule a discovery call today.

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