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Make Your Small Business a Winner: Managing cash flow for survival

by Anna Hipkiss

Does your heart sink when you hear the words cash flow? Sink at the thought of managing cash, and also because you know it can be a serious problem and you ought to be on top of it....

If you are thinking like this it means you do not understand cash flow at all, because if you did, it would be top of your business priority list. Cash is all you have at this moment, and no amount of orders and promised cheques will keep your business going when a supplier insists that you pay a bill now, today.

Many people muddle along – they know roughly what’s to be paid out, and they manage to juggle cash to cover it. You can muddle too, until someone doesn’t pay you because they’ve gone bust, and a supplier wants their money now, to avoid going broke. You can end up as the bankrupt meat in two bankrupts’ sandwich!

Manage your cash in two ways. First, know what cash you’ve got, and how it is flowing: what has to go out and what’s due to come in.

Second, work on improving the flow, so that you have more coming in well in advance of less going out. Improvements can mean higher prices, or lower costs or better timing – taking longer to pay, and getting paid promptly.

80% of small businesses fail because of cash flow problems. Cash flow is not difficult, it’s simply that the problem just doesn’t feel important enough until it’s catastrophic, and then it’s too late.


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