Why great cash flow leads to a successful business

Cash flow is the key to having a successful business. If you have poor cash flow management, you are probably not going to last long in the business world. Cash flow is the center of every business. It directly impacts every part of your company from accounts receivables to sales to your office manager.

Cash flow is essential for a growing business since it is part of your budget. If you are overspending before receiving payment from your customers, you are looking at bankruptcy or closure of your business. Many companies's make the mistake that purchase orders are part of the sales for that month. While they are counted as a sale, the actual money usually doesn't come in for 30 to 60 days. This causes many companies to overspend because their purchase orders aren't being paid in a timely matter and they think the money is already there.

Never base your cash flow on sales numbers. This is deceiving since only credit card payments are deposited the day of the sale. Checks, purchase orders, and money orders all take time before you will see that money in the bank. Having a good AR department is essential in following up with invoices and making sure you are paid in a timely matter. The last thing you want to do is make people skip paydays because you don't have proper cash flow to accommodate the company's expenses.

Monitoring your cash flow on a regular basis will help lead to a successful business as you will have control and can see where the money is being spent and exactly how much money is coming in.

Here are a few steps you can use for improving your cash flow:

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• Know your Budget - Always budget for items and do not overspend your cash flow. Know your projections with the accounts receivables department as to your current cash flow situation.
• - Invoicing. Make sure you have a good policy in place for invoicing your clients on a regular basis.
• - Request a down payment. If you have a large sale or have had cash flow problems in the past; request half of the money before you complete the sale with your clients. Having large orders that are pending for long periods of time will be harder to collect on.
• - Credit Card payments. The best method to have quick cash flow is request a credit card payment. The money is immediately transferred into your bank account and you don't have to wait 30 days.
• - Work with your bank. Have your bank notify you of credit score changes, work on building a good relationship with your bank and don't let your loans default or have late payments.

Cash flow is the biggest factor for having a successful business. Having a well defined financial management plan will help to efficiently and effectively manage the activities related to cash in the company. Review you cash flow often, know what your accounts receivables department is doing to reduce the pending payments, and discuss options with your sales department to improving the payment at the time of the sale.

Always make sure your customers are invoiced as quickly as possible and collect on past due accounts as quickly as possible. Don't hesitate to decline a sale to a previous customer if they have a late payment or simply have not paid their last invoice. Accelerating cash flow will happen rapidly if you do this.

Overall be smart about the way your company spends and collects money. If you want a successful business, take the time to review your business finances often, cut out small, unneeded expenses and wait to purchase larger expenses until you know you have the money to pay for it.