BBB Business Tip: Being Cash-Flow Positive is Crucial for the Survival of Your Business
The Better Business Bureau (BBB, bbb.org/nebraska) recently offered some information to help businesses understand how crucial positive cash flow is to their very survival. As you know, businesses cannot operate without working capital, and working capital dries up without a positive cash flow. Positive cash flow, or having more money than you do overhead, indicates that the liquid assets of a business are increasing. It is a sign of growth. Liquid capital is needed to pay the bills, reinvest in the business, and save enough money to cover expenses during slower times. If your company has negative cash flow, it is dying a little more every day.
How can you find out if your business is cash flow positive or negative? At the beginning of the month, tabulate how much cash you have on hand that you can use, without including any unpaid invoices or collections. Subtract from that amount your expenses, including operating overhead, debt repayment, investor payments, and other monthly bills. If you have money left over, your business is cash-flow positive. If the number is negative, you have a negative cash flow. Bankers need to know that a business is making sales and will pay the bills every month if they extend a line of credit. If they can see that a company expects enough revenue to cover the bills, they will open liquid operating capital to help the business meet demand.
The Better Business Bureau has been serving local communities since 1936. The overall mission of the organization is to be a leader in advancing marketplace trust. For more information, visit bbb.org/nebraska or call (800) 649-6814. For more ideas about growing your business, go to bbb.org/article/business/23745.