Working Capital

Managing Cash Flow

Having a positive cash flow simply means having more money coming in than going out. A positive cash flow is critical to the operation and success of your business, and is a key indicator of a healthy, well-run business. Unfortunately, especially in the beginning, maintaining a positive cash flow can be difficult.

There are two basic keys to maintaining a positive cash flow. First, you need to know how much cash is coming in and when, and second, you need to know how much cash is going out and when. The trick lies in balancing your income against your outlay. To do this, you need to be aware of a number of important factors. Is your business seasonal? Is your payment cycle in sync with your collection cycle? Are you managing your assets and inventory properly by purchasing only what you need, when you need it? In order to keep your finances running smoothly, you'll need to constantly evaluate all of these things and be prepared to change your practices as necessary.