Often we see the phrase “Your credit is good but we need cash” especially in retail stores. It sounds intimidating or funny, but not if you’re a budding entrepreneur since it’s ideal to have cash always. But how really important it is to have good cash flow for everyone’s business?
Cash flow is the money that come and go in your business to make it sustainable. It is in good condition if you can secure payments on time like for your suppliers and partners, and still keep profits. On the other hand, not getting enough cash promptly may let you experience bad cash flow and that means a foreseeable rocky business. If you’re in that negative state, possibly you’re stressed out where to get money to pay your expenses and suppliers, and starting to accumulate penalties or debts.
Some of the basic tips to maintain positive cash flow are to keep the liquidity of your assets and see to it that your payments from your clients as soon as you can. Remember that it’s not only about money, but also right timing. If you need to speed up your cash collection, you should also try to slow down in paying your suppliers according to Henry C. Ong, CMC, CMA, president and COO of Business Sense in his column on Entrepreneur.
To boost your cash collection, Ong also advised to do activities that make your clients pay at once. Some of his suggestions include get down payments, implement strict credit policy, give discounts for those advance good payers, and regularly check your collection.
In an interview with The Guardian, Agnes Cserhati of AC Powercoaching shared that prioritizing cash payment than profit margins even it means small-time clients, but pay immediately.
“If your cash flow is in order, your profit will be in order,” she says. “A lot of businesses do not make it past six months. They might have been a profitable business eventually, but they need to have good cash flow to survive.”