Cash-flow management involves close monitoring of cash flow, which is the amount of cash being transferred into and out of a business.
If your organization has positive cash flow, it means that the amount of cash available at the beginning of a period (opening balance) is less than the amount at the end of that period (closing balance). In order to remain in business over an extended period of time, an organization must maintain positive cash flow.
I talked to two experienced owners—Brandon Harris, president of content marketing agency NUMedia and Christine Yaged, chief product officer of finance information portal FinanceBuzz —to share their most critical cash-flow management tips.
1. Stay within your means.
Even if your business is growing rapidly, if you don't practice healthy cash-flow management, you can dig a deep hole from which it's difficult to emerge.
"It's easy to find yourself in credit trouble, missing payroll, taking on expensive loans that further your debt and, eventually, declaring bankruptcy," says Harris.
“It's your job to make sure you can cover your bills so that all stakeholders are satisfied and things are running smoothly," says Yaged. “Otherwise, you'll severely disrupt business operations and spiral from there."
2. Avoid scaling too quickly.
Sustaining positive cash-flow management can mean being patient with your organization's growth, holding off on expansion plans and tempering your excitement about the business's potential.
“Be careful not to overextend with too many early hires and a bunch of credit card debt," says Harris. “Build your war chest organically, and you'll thank yourself in the long term. I've tried the fast, hard money route, and the stress on your business and your life is simply not worth it."
For more where this came from, head over to the AMEX OpenForum.
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