Reasons to avoid negative cash flow
Negative cash flow can have profound, irreparable effects on your company. Spending more than you receive from your sales can cause problems paying suppliers, staff salaries and yourself!
The affects of negative cash flow will create a difficult road to financial recovery. If you fall behind on payments it may mean banks and financial institutions ask for their money in full. Others may repossess the items you need to continue in business, or even place a lien against items of great monetary value. This is why it is extremely important to make sure that you are on top of your business cash flow at all times.
You may notice that your profit margin is not much higher than the funds that are spent to run your company. It is at this time that it is best to review your cash flow to see where adjustments can be made. Are you charging enough for the service you provide? Are you spending too much for supplies? If so, it is important to make adjustments to generate a larger margin of profit. In doing so, you should notice that you have a higher rate of cash flow coming in, and more importantly less of your cash flow going out.
The next article in this cash flow series looks at ways to secure positive cash flow.
For information about how we can help you with managing your cash flow, go to our cash flow section or contact us on info@mgarnerconsulting.co.uk or ring us on 0800 242 5287.