Cash flow is the absolute foundation piece of all business, without positive cash flow businesses quickly start to struggle. Cash Flow can be thought of as the oil in your machine that is your business.
Cash Flow can be negative as well as positive.
So what do we mean by negative cash flow?
Negative cash flow is when there's more cash flowing out of the business than in this is where businesses begin to struggle.
Positive cash flow is the opposite when there's more cash coming into the business.
When a business is in the infancy stage, cash flow is an absolute priority. In fact, it is the single most important thing that a business in infancy needs to tackle. Typically to increase cash flow in a business, you need to increase the number of sales or the average sales value.
When a business moves into adolescence, cash flow is still important. However, the secret here is to create a predictable cash flow. Your marketing needs to produce a consistent number of leads, which you then need to convert into sales in a consistent and regular manner.
For a business in maturity, cash flow is the security for the business, it enables the business to invest, to have an impact, and it can make the business more attractive if you want to sell.
The Cash Flow Cycle.
The cash flow cycle is basically how cash is used in the business.
The amount of cash at the beginning and end of a reporting period is the cash flow cycle.
Improve your cashflow
All the research I undertook at how to improve the situation in my business, pointed at increasing positive cash flow.
More sales, and higher average sales value.
But don’t underestimate the significance of cutting costs, trimming even more fat off an already lean business. There is always some fat you can remove from your business that doesn't affect the value you offer. Not suggesting a penny-pinching exercise, but cut all the things that don't really add value, or that you're paying for and don't use.
