Maintaining healthy cash flow is one of the most pressing challenges faced by small businesses. You need a consistent flow of cash to meet your payroll obligations, pay bills, invest in inventory and a host of other everyday expenses. Here are five tips to help you prevent cash flow problems and improve the overall health of your business.
5 Tips to Prevent Cash Flow Problems
1. Forecast Your Cash Flow
It is a good idea to create an estimate of cash coming in and cash going out on a monthly basis, and continue to keep it updated. The cash flow forecast should help to identify periods of time when cash is low. If you know ahead of time, you can prepare with appropriate financing or reduction of expenses. You need to know that you will have enough cash to pay suppliers, employees and taxes on time. The cash flow forecast will also help you to identify if there is an issue with accounts receivable (customer payments).