Cash flow represents the movement of money in and out of business. A positive cash flow is a healthy sign while a negative flow indicates trouble. Let us see what are the typical 6 signs of bad cash management in business:
- High Debt levels– Businesses take debt for meeting some expenses or expansions. If a major chunk of your income goes to service debt, strain on cash flow increases.
- Difficulty paying suppliers– If you find yourself constantly juggling payments to suppliers, then you need to have a review of your cash flow management system.
- Inability to cover regular expenses– If you are regularly facing issues in payment of rent, salaries and routine expenses, this is a clear sign of poor cash flow.
- Over relying on one customer– If your monthly income is primarily linked to one customer, then you may be at risk if the customer stops buying from you or if he delays payment.
- Lack of cash reserves– A lack of cash reserves can leave your business vulnerable as any unexpected expenses can topple your cash flow.
- Declining sales– If sales show a downward trend whether due to market conditions or lack of adequate marketing, this will lead to decrease in cash flow.
Recognising the symptoms of poor cash flow is the first step towards improving your financial health. By taking proactive steps to address these issues, you can improve your cash flow and set your business up for success. Remember, the key to success is to take action. So, start today, and watch your cash flow grow!
Remember Cash flow does not show PROFIT! Even a profitable business can have a negative cash flow.
Next Steps for you and your business
Here at The VirtuVantage CFO consulting, we have the knowledge and experience to rectify poor cash flow within your business. This can be done from conducting a review of your business, creating a cash flow forecast or designing a budget.
Please do not suffer in silence; contact us to see what help we can bring to you and your business.