​​Is good cash flow management the key to survival in business?

In a cost-of-living crisis, many businesses are looking at ways they can weather the storm. From adjusting your own business expenses and other things, is a good cash flow management system the key to survival? We think so.

There are millions of businesses around the world and only a few of them make the groundbreaking profits that make headlines. The majority of businesses are breaking even or just making enough to call a profit. Of course, all businesses want to turn a profit at some point, however, the key to surviving recessions and other financial crises can be swayed by good cash flow management processes.

What is good debt for businesses?

Good debt essentially means you borrow money for investments that will bring a return. This type of debt is usually taken out for projects that can generate more income or growth opportunities for the business. Good debt should be able to be paid off efficiently and 

based on expected returns from the investment or project.

How to avoid debt as a business?

There are a few ways you can avoid debt as a business. Develop a strategic financial plan that can be adjusted according to the changing needs of your business. This will help you anticipate upcoming expenses and maintain a healthy cash flow.

Avoid taking on debt if at all possible, by finding ways to cut costs or increase income. If you need to borrow money for certain projects, make sure that the loan is worth it and can be paid off.

Finally, look at ways to cut costs and manage your cash flow shortages. Essentially make sure that you don’t spend more than you have coming into your business. Avoiding debt will mean making tough decisions, but ultimately those decisions could be the difference in your business’s survival. 

How to create good cash flow in your business?

  1. Consider investing in forecasting software and use it to anticipate cash flow needs. Forecasting helps you plan for future expenses, manage short-term cash deficits, and create an action plan for unexpected events or slow sales periods.
  2. Use a budget to track all income sources and expenses. Budgets help you track your business expenses and allow you to have a full overview of where you can cut costs or move finances around. 
  3. Utilise cash flow statements to review the cash flowing in and out of your business. This will help you find areas where you can reduce costs or make more efficient use of funds.
  4. Implement a debt management strategy to help you stay on top of debts owed by your business, as well as any payments due from customers. A debt management system can help you prioritise payments and set up payment plans for those debts that cannot be paid off in full immediately.
  5. Set realistic goals for your business’s cash flow, taking into account the current economic climate. When setting these goals, it is important to remember that some goals may need continuous monitoring and updating according to your business situation.

How to incorporate a cash flow management system into your business?

  1. Create a cash flow statement to track all income sources and expenses. This will help you identify areas for cost-cutting, as well as plan for future expenses.
  2. Utilise forecasting software to anticipate upcoming needs or events that could influence your business’s cash flow.
  3. Develop budgeting strategies such as setting realistic goals and tracking expenses closely. This will help you maintain a healthy cash flow which ultimately keeps your business afloat.
  4. Utilise debt management strategies such as creating payment plans, reducing staff costs, or renegotiating contracts with vendors to manage payments owed by your business. When times are tough if you want your business to survive you need to consider all avenues.
  5. Invest in good debt when necessary, but be sure that it is worth the investment and can be paid off sooner rather than later.

By using these steps, you can create a sound cash flow management system for your business. Including proper planning and monitoring, you will be able to maintain a healthy balance of profits that keep your business not only surviving the financial storms but thriving.

If you need help reclaiming unpaid invoices or need assistance in debt recovery contact the team at My Debt Recovery.


Get In touch

0800 009 6106