Cashflow is the net amount of money moving in and out of your business in terms of income and expenditure. In an ideal world, your cashflow would be positive at all times – in other words, you’d have more money coming in than going out.
However, the world can be far from ideal, so there may be times when cashflow is negative. Sales can be affected by the weather, or a customer may be late settling an invoice, but you still have wages and bills to pay.
Strong positive cashflow keeps a business alive and helps you fuel growth. Poor cashflow can ultimately see a business fail. If you’re experiencing cashflow issues, you need to get to the root of the problem as quickly as possible.
When your business is busy and generating cash, the slower months can seem far away, but it’s essential to plan ahead. By analysing your historical cashflow, you can identify fluctuations in demand and plan for periods when demand is low. This exercise can also reveal when your business might come under pressure and how much money it will need until the next peak season. Putting money aside when times are good will also help to give you a boost when demand picks up again.
Ebb and flow
Success should be measured by how your business performs not only during peak seasons, but in slow times too. Managing your outgoings and reducing unnecessary costs is key when things are quiet, so scrutinise every purchase and payment to see where you can make savings. The slower months also offer you more time to reflect on your goals, engage with your customers and chase any late payments.
You’ve worked hard to build your business, so don’t let your efforts fall victim to cashflow woes. No matter how well you budget for the lean times, there may be occasions when your business needs additional funds.
A business loan could provide your business with not only a cash cushion for the slower months, but also the funds you need for growth when demand picks up again.
Overall, loans can be a helpful tool for improving cashflow and growing your business. However, it’s important to make sure this is the right decision for you. If you ever find that you are in financial difficulty, you should let your lender know as soon as possible so they can work with you to find the best solution.
Find out more about business loans at LendingCrowd.