Any successful, thriving business will have good cash flow management otherwise it will not be sustainable and expansion will not be possible. Having positive cash flow maintains liquidity in your business as well as contributing to growing your business. We previously looked at tips to managing and improving your businesses cash flow and if you follow these you can see the following benefits.
Having good cash flow management will mean that your business can honour its debts and pay on time. This will help you strengthen your relationship with suppliers and consequently if there’s an instance where you experience cash flow problems, suppliers may be more sympathetic in extending credit terms. It also helps your credit rating if you ever seek financing. However, if your business is habitually late when paying debts, when you do need a favour, suppliers mightn’t be as inclined to assist you.
2. Less stress
Another benefit of having good cash flow management is that you will worry less about the daily operations of your business. If week on week you’re wondering where the next cash injection will come from and whether you can meet your financial obligations then your energy is not being utilised to positively drive the company’s expansion. This stress can create health issues and conflict within the company if employees’ wages are threatened. Having positive cash flow allows you to spend your time building a successful company.
Good cash flow management can reduce your reliance on external resources if you’re trying to expand your business and avoid high interest. If external resources are required such as a bank loan, you may be in a stronger position to negotiate repayment terms, especially interest rates.
To summarise, having good cash flow management is paramount to a business’ success. To learn more on the topic you can read our useful cash flow guide which includes a handy checklist.