Cash flow is considered the bloodline of the business’s financial sphere. It has got enough reasons to be positive and stay that way. A positive cash flow is an indicator of not only fulfilling revenues; but also the good health of your business. It is time you take a step and make sure it stays on the positive side.
Your business deals with a good amount of money almost every day. It might also be difficult for you to pay attention to all the details of the financial side of your brand. If you feel stressed or cannot manage time to contribute to the financial department quite often, it is better to speak to an accountant and recruit one. You might also work with a professional online if you please.
Let’s Understand Positive and Negative Cash Flow in the Simplest Way
As a matter of fact, cash flow can go from negative to positive and then positive to negative, given any point in time. When you monitor it and make relevant changes in business processes to make it even, you may not have to worry about it. However, keep in mind that the cash flow system is still a very sensitive part of the business and keeping a close eye on it will help you understand its nature. That can, in turn, guide you to prevent it from going negative.
To understand the difference between positive and negative cash flow, we need to determine something called the accounts payables and accounts receivables.
In simple words, accounts payables mean the money or the transactions you need to make to pay for your brand, such as issuing salaries for the employees or the businesses you work with; asset maintenance and repair; utility costs; production costs etc. On the other hand, accounts receivable means the income schemes of your brand, such as revenue generation amount, sales amount and income from other sources, such as passive earnings.
When accounts payable reigns over accounts receivable, it plainly means you need to pay more than what you get. This factor creates what we know as negative cash flow. To turn it into a positive cash flow, we must ensure that our brand’s accounts receivable is greater than accounts payable in terms of monetary value. You need to keep it going to maintain a positive cash flow, which is very beneficial for the business’s revenues and processes.
- What Steps Might Ensure the Cash Flow Stays Positive
We can do many things to make a positive cash flow a permanent phenomenon. However, we need to act fast and learn a little about the real nature of our businesses too. With that being said, we can expect that you have taken steps for that already. Now, we can follow the points mentioned below to learn to maintain cash flow:
- Make Invoices Properly and Send Them Early
A good way to maintain a positive cash flow is to make your accounts receivables a tool. Make invoices properly with all the details furnished with the right amount of money and the terms. State the amount and terms in bold. Keep a due date for the payments and charge late fees. In this way, you can use your invoices as a magnet to attract money at the right time.
- You Might Not Need to Make Large Investments
No it is not that you have to maintain a steady cash flow by not paying your employees or by deducting the money wherever possible. And why is this so important for you? It is because a brand needs to make investments now and then.
If you keep these investments small, then you might as well do justice to the accounts receivable by minimising accounts payable as much as you can. Instead of making larger purchases, just go for its smaller counterparts. For example, when you know you can own a pickup truck for your business, lease or rent it instead of buying it.
- Do Not Ignore Debts
Debts are never going to make you feel comfortable. Besides, debts can be paid at instalment rates, which are a significant burden on you for the accounts payable part. Although you want to make positive changes by minimising expenses, debts will drain off a chunk of money with each instalment. The worst part of the debt is that it can disturb your business finances with multiple rates if you have more than one debt. In addition, you will lose more money for unpaid debts as their interest rates will increase.
You may look for alternative solutions to take care of debts. For example, you may start earning part-time or raise business revenue in a routine manner to collect money to repay your debts. However, these might be tedious and complicated processes. In this regard, you can tackle these many debts with one particular debt.
You can get quick loans in Ireland with no guarantorfor debt consolidation. Direct lenders often lend these sorts of loans. A loan like this can take care of your multiple debts right now by repaying them all. As a return, you get a single rate and repayment, which might open doors to saving money drained from those previous debts. Added to that, direct lenders might help you choose a cost-effective package based on your business income because they have many repayment plans for one loan.
- Use Automated/ Electronic Transactions
Of course, going through your accounts payable must happen before you make the payments. If you are already monitoring them with extra attention, then you may automate your payments and use online transaction methods. You do that to make timely payments, which will save you from paying late fees.
- To Conclude: Pay Close Attention to Budgeting
Keep in mind that we can manage our cash flow. Although it can go negative at times, you can get money from other sources and balance the cash flow system to stay positive.
For example, suppose you have got a negative cash flow at a sudden point even though you have budgeted. In that case, you can take out an unsecured business loan from one of the authentic money lenders in Ireland and turn negative cash flow into positive almost instantly. Nevertheless, making a budget beforehand helps you maintain the cash flow and stay inclined to its positive form.
Budgeting the cash flow may help you predict its outcomes. To do this – let’s suppose for the next year – look at the profit and loss statements of the previous year. Also, review income sources and major sales, such as a one-off sale that hiked the income to a great level. Forecasted costs can also help you understand the cash flow system and set a budget for the coming year. Doing these steps, you will get confident in retaining positive cash flow. Description: Maintaining cash flow is vital for any business. When you take steps to ensure keeping the cash flow positive, you might be doing justice to your brand.