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Why is A Business Cash Flow Important?

Why is A Business Cash Flow Important? 

A small business cash flow determines its future. If the business has enough cash it will thrive, if it does not have cash it will collapse. A cash flow statement shows the exact amount you are making.

Cash on hand can let you do the following;

  • Pay your expenditures and increase more stock and assets
  • Managing your business cash flow will ensure that you always have some money to meet your expenditures and buy more assets. Also you need to stay afloat when some customers take longer to pay you.
  • Take out a business loan

A positive business cash flow can give you enough confidence to borrow money. Besides, cash flow statements can be used when calculating your tax returns. Then these cash flow management records can serve as evidence when you are approaching banks for a loan. So it makes sense to maintain a healthy cash flow balance as it will be easy to convince your creditors that you won’t default on your loan.

We all know that there can be a lag between sales and receipt of payment. But the bills aren’t going to magically disappear or change their due dates because you haven’t collected payment. You’ve got to have enough cash to get you through lean months when the flow just isn’t there.

Build up some cash reserves to avoid this problem. Review your cash flow history and arrive at a reserves estimate that would cover your business for three months, six months, and a year. Just knowing those numbers can help you paint a better picture and, thus, make better business decisions.

You can also arrange a line of credit with your bank. When in an ok position it’s easier to get money than when you’re not, so you can talk to your banker about having the ability to borrow up to a preset limit any time you need it.

Give the office a call on 1300 788 941 for more information about a business cash flow.

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Bottrell Group

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