Cash Flow Case Study

What do you think is the most important life blood of a business? Is it profit, sales growth, or customer loyalty? While these are several important arteries of blood flow for a business to survive, they are not the heart which keeps the business alive. You can have all three and still go out of business if you do not have the one thing all companies need to live; which is cash! It takes cash to pay your employees, turn the lights on, open the door, and keep it open.
Having cash available when you need it is crucial but you also have to know how and when the cash flows in and out of your business. You just don't "know" these things. There are skills involved to measure, monitor, and manage cash.
How you can make cash flow work for you rather

Have you ever tried bartering? Make sure you are using business credit cards that award travel points to minimize cash expenditures on future business trips.
Establish clear payment terms and expectations with your customers and have a formal receivable collection process in place. Consider discounts for prepayment or require a deposit for large purchases.
Prepare For the Worst
When you see a trend that is restricting a positive cash flow, then you need to have tools at hand to correct the problem, fast. When developing a plan to infuse cash into the business, make sure you line up the sources for the appropriate use. For instance, short term cash problems can be handled with credit cards or a line of credit. Longer cash flow needs might be financed through long term secured loans or a capital loan.
Other ways to improve cash flow might be to improve inventory turn and carry a lower supply of inventory. Make sure you have no cash sitting around; deposit checks the same day you receive them. Avoid slow paying customers. Make slow pay customers pay their bill before placing another order. Pay your bills on the last date they are due. Consider leasing instead of purchasing equipment.
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