It’s no secret that cash flow is literally the lifeblood of all small businesses, and when you don’t have positive cash flow, chances are your business will either be struggling or it will be defunct. There is very often a difference between the time that you have to pay your suppliers and the time where incoming revenues will provide funding that you need. Having a positive cash flow will bridge the gap between these two-time frames, to help you stay afloat.
Speed Up Receivables
By billing your customers promptly, you will be able to have incoming revenue more promptly as well. You may also want to change the frequency of your billing practices, and send out an invoice immediately rather than waiting til the end of the month.
If you can obtain a line of credit, you’ll be able to make emergency purchases, and cover the gap between payables and the time you have money coming in. You might also want to apply for a business credit card which you can use to pay your suppliers.
It’s generally not a good idea to purchase equipment or make other major purchases using working capital. Instead, these types of acquisitions should be made with long-term loans, so that you can spread out those payments over a longer period of time.
If you have equipment that’s just laying around and not being used, you might want to consider liquidating it so that you can obtain cash needed for your business. If you sell the equipment below book value, you will actually be incurring a tax loss, and that can be declared on your tax filing as an offset to profits earned by your business.
Unless you have some significant reason for paying early to a given supplier, you should think about how late you can defer your payment, so as to keep cash circulating in your own business. When it’s absolutely necessary to pay your suppliers, you can then release funds to cover your commitment.
Need a Loan to Establish Positive Cash Flow?
In many cases, a business loan will help your company to establish positive cash flow, and possibly to take advantage of current business opportunities. Contact us at Nations Capital Financing to discuss some options which might be available to you in the way of a business loan.