How it Works to Keep Your Business Afloat:
Cash flow is vital to keeping your business afloat. If you have more cash going out than you have to come in you’re not going to be able to stay “afloat” as a business for very long.
Cash will come in from clients or customers purchasing your goods or services. This is your main source of income also known as revenue. Other cash may come from collections of accounts receivable if customers do not pay their invoices on time.
Cash going out of your business will cover a variety of things from employee salaries to operations costs. Other things like rent and utilities for your office spaces or storefront may come out of this cash as well. Basically, all business-related expenses will account for cash flow going back out.
Think of your business bank account and remember that you have to have more cash flow going into the account than coming out of the account in order for your business to have created revenue or make a profit. If you have more cash going out than coming in or are in “negative cash space” for long periods of time that could spell disaster for your business in the long-term.
Cash vs. Real Cash:
Real cash businesses that value paper money as their currency such as restaurants or retail shops need to have cash on hand to pay their bills as that is their main source of cash flow. Keeping invoices or other documentation of how much money is coming in versus going out is essential to know how much money the business has and how much profit the business is actually making (if any).
Cash Flow When Starting a Business:
When starting a business cash flow can be a tricky subject to tackle. Many expenses come up just at the beginning and money flows out of the business rapidly. If you don’t have a large base of customers paying into the business through the purchasing of goods or services than the business may experience a cash flow deficit.
This may require a business to use something like a line of credit or another temporary source of cash flow may be required in order to get the business through till they can get enough cash flow in to cover their expenses and possibly have a bit of a surplus in cash.
This is why cash flow is so important to businesses and to their survival. For more information on how you can keep your cash flow positive for your business please feel free to contact the Skybridge Capital Group for more information.