How to Maintain a Positive Cash Flow

Cash flow problems sink more businesses than any other sorts of difficulties. Even companies with otherwise sound fundamentals and positive prospects can succumb to trouble with keeping cash flow in the black.

Fortunately, there are a number of proven ways to make it less likely that short-term fluctuations in cash levels will ever cause problems. Heed the following five tips and your own business will become a lot more resistant to cash-flow-related struggles.

1. Seek the Right Kind of Help When It Matters the Most

Businesses that regularly grapple with cash flows tend to improvise ways of dealing with the related issues they face most often. Sticking to such fragile, informal tactics at the wrong time, though, can be devastating.

An entrepreneur who has built up a business over many years, for instance, would always be ill-advised to allow cash flow imbalances to persist when putting that company on the market. Simply by choosing or the like, far more effective solutions could easily be developed.

Even when it might seem practical to deal with routine cash flow difficulties as they arise, it will be wise to recognize there are situations where more comprehensive solutions will be called for. Whether that means applying for a loan from a bank or getting ready to sell a company, be prepared to respond appropriately.

2. Budget Better

Most cash crunches arise when accounts receivable fail to align with required spending. Even entrepreneurs who regularly fight with unbalanced cash flow sometimes fail to look at both sides of the equation.

In fact, surprisingly many small companies have very little in the way of formal, strategic budgeting arrangements. Simply taking another look at how a company spends money and coming up with improved arrangements can make a huge difference.

3. Obtain Some Affordable Credit

Even particularly disciplined, responsible business owners sometimes run into cash flow problems. If such issues are uncommon enough, it can easily make sense to resolve them using credit.

While there is always a danger in relying too heavily on borrowing, making strategic use of low-cost credit can benefit a business greatly. That will almost always require shopping around, though, to be sure of discovering and leveraging the most appropriate, cost-effective options.

4. Collect More Aggressively

Some business owners become so fearful of endangering important relationships that they let overdue accounts remain so for too long. Failing to collect accounts receivable as they come due will always make it more difficult to maintain positive cash flow.

It can be a bit uncomfortable and challenging, but learning how to be more assertive with customers about payments will pay off. Over time, accounts will even become less likely to fall behind, making for less required work, in the end.

5. Be Strict About Discounts

Giving too many deep discounts can see a business descending into structurally unavoidable cash flow problems. If it costs more to provide a product or service than customers are being charged, cash flow will necessarily become negative.

Discounts can be useful, but they should only be given out with a definite, strategic purpose in mind. Business owners who reserve healthy discounts for situations where they will produce the most worthwhile results tend to fare better with managing cash flows.

Enjoying the Feeling of Freedom That Comes From Positive Cash Flow

Some entrepreneurs end up feeling as if fluctuating, unpredictable cash flows were simply unavoidable. In practice, using the five tips above should make it easier to stabilize your company’s cash flows and keep them positive.


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