{"id":4044,"date":"2020-02-25T06:02:54","date_gmt":"2020-02-25T06:02:54","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=4044"},"modified":"2021-04-24T15:11:38","modified_gmt":"2021-04-24T09:41:38","slug":"improve-cash-flow-management-in-business","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/improve-cash-flow-management-in-business\/","title":{"rendered":"How to Effectively Improve Cash Flow Management in Business?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">For any\nbusiness to survive, cash flow is the most important financial factor. A\nCompany may have fantastic revenue, reasonable expenses and significant income,\nbut if its financial operations are not managed efficiently, it could still\nhave a negative cash flow. And if a company has a negative cash flow, no matter\nhow promising the business model is eventually, it will go bankrupt. Without\ncash, profits are meaningless, and most of the businesses fail because of poor\ncash flow management. For a business to succeed, there should be a proper cash\nflow management in business. Further, in this blog, we will talk about\neffective ways of improving cash flow in the business.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/improve-cash-flow-management-in-business\/#What_is_Cash_Flow_Management\" >What is Cash Flow Management?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/improve-cash-flow-management-in-business\/#Importance_of_Cash_Flow_Management\" >Importance of Cash Flow Management<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/improve-cash-flow-management-in-business\/#How_to_Improve_Cash_Flow_Management_in_Business\" >How to Improve Cash Flow Management in Business?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/improve-cash-flow-management-in-business\/#Take_Away\" >Take Away<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Cash_Flow_Management\"><\/span>What is Cash Flow Management?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Cash\nFlow Management in a business refers to the process of monitoring the inflow\nand outflow of funds. The fundamental goal of cash flow is to make sure that\nthe incoming flow of funds in a business is always greater than the outgoing\nfunds. Here it is important to understand that cash flow is not similar to profits.\nA business may have positive cash flows and still be in loss. There are two\nkinds of cash flows:<\/p>\n\n\n\n<ul><li><strong>Positive\nCash Flow:<\/strong>&nbsp;This occurs when\nthe incoming flow of funds into your business from sales etc. is more than the\noutgoing funds of your business through monthly expenses, salaries etc.<\/li><li><strong>Negative\nCash Flow:<\/strong>&nbsp;This occurs when\nthe outflow of cash is more than incoming cash. Negative cash flow generally\ncreates problems for businesses which eventually may lead to bankruptcy.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Importance_of_Cash_Flow_Management\"><\/span>Importance of Cash Flow Management<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Most of the businesses fail due to poor cash flow management. To prevent a business from bankruptcy, it becomes s essential to have proper cash flow management. Following are some of the points which show how a good cash flow management system enhances the overall workflow of the business.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"547\" height=\"245\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/image-22.png\" alt=\"Importance of Cash Flow Management\" class=\"wp-image-4045\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/image-22.png 547w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/image-22-300x134.png 300w\" sizes=\"(max-width: 547px) 100vw, 547px\" \/><\/figure><\/div>\n\n\n\n<ul><li><strong>Credit Worthiness:&nbsp;<\/strong>Companies with a positive cash flow develop a good reputation with banks and financial institutions. <strong>Banks and financial institutions<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Financial_institution\">[1]<\/a><\/sup><strong> <\/strong>prefer extending credit to such borrowers. Companies with impressive credit rating are more likely to raise funds from the open market or seek foreign investment.<\/li><\/ul>\n\n\n\n<ul><li><strong>Enables\nInvestment:<\/strong>&nbsp;The theory of cash\nflow management advocates that inflow of funds should always exceed the outflow\nto sit on a surplus. The surplus money can be invested to reap benefits out of\nthe investment. Therefore, a company with positive cash flow can indulge in\ninvestments to reap returns.<\/li><\/ul>\n\n\n\n<ul><li><strong>Enhances\nthe relationship with Vendors and Employees:<\/strong> An efficient cash flow management ensures the timely payment\nof vendors. To run a successful business, it very important for the business\nowner to maintain a good relationship with the vendors. If a company has a\npositive cash flow, it allows the company to be in a position to honour the\nvendor obligations on time. <\/li><\/ul>\n\n\n\n<p>Moreover, a positive cash flow also allows businesses to timely disburse the regular expenditure such as salaries. Timely disbursed salaries keep the morale high of the employees and give them a sort of motivation to work efficiently for the company.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/national-financial-reporting-authority\/\">\nNational Financial Reporting Authority &amp; It\u2019s Constitution<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Improve_Cash_Flow_Management_in_Business\"><\/span>How to Improve Cash Flow Management in Business?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare some of the steps that should be followed to improve the Cash Flow\nManagement in Business:<\/p>\n\n\n\n<ul><li><strong>Open a\nSeparate Bank Account for your Business<\/strong>:\nA common mistake that startups do is mixing business and personal bank\naccounts. For initial financing, owners tend to use their personal bank\naccount, which should be strongly avoided. All the related business\ntransactions should be done through a separate business account.<\/li><\/ul>\n\n\n\n<ul><li><strong>Keep\nTrack of your Inventory:<\/strong> To\nmaintain good cash flow, an eye should be kept on inventory movement to\ndetermine which items are selling and which are just kept in there. Inventory\nlevels should be kept lean so that your working capital isn&#8217;t tied up\nunprofitably. <\/li><\/ul>\n\n\n\n<ul><li><strong>Buffer\nMoney<\/strong>: Businesses should always\nkeep at least three months worth of outgoings in the bank account for future\nemergencies.<\/li><\/ul>\n\n\n\n<ul><li><strong>Control\nCash Outflows<\/strong>: The best way to\ncontrol the cash outflows of your business is to use cost-cutting\nopportunities. If the cash outflow of your business is unmanaged, it may\nsilently end your business.<\/li><\/ul>\n\n\n\n<ul><li><strong>Fasten\nthe Recovery of Receivables<\/strong>:\nInstead of waiting until the end of the month for invoice generation, it is\nadvisable to generate the invoice as soon as the goods or services are\ndelivered. This will guard the businesses against late payments. To fasten the\npayments, businesses should make the payment methods more feasible for their\ncustomers; this can be done by adding payment link to invoice so that customers\ncan pay through their credit or debit card.<\/li><\/ul>\n\n\n\n<ul><li><strong>Delay\nPayables<\/strong>: Unless there is a\nworthwhile incentive for businesses to pay early, it should be figured out how\nlate you can pay without risking late fees or harming the relationship with\nvendors. This allows the business owner to keep cash in his account until it\u2019s\nneeded the most.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Take_Away\"><\/span>Take Away<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Business owners in their early days of business tend to realise the fact that \u201cCash is King\u201d. Having an adequate stock of cash provides an ample amount of flexibility to any business. Therefore, it becomes really important for companies to have an effective cash flow management as it shields them from the risk of  bankruptcy and also helps them to expand the horizons of their business.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/basic-financial-statements\/\">What are the Basic Financial Statements?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For any business to survive, cash flow is the most important financial factor. A Company may have fantastic revenue, reasonable expenses and significant income, but if its financial operations are not managed efficiently, it could still have a negative cash flow. And if a company has a negative cash flow, no matter how promising the [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":4046,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1,128],"tags":[354],"acf":{"service_id":"289"},"authorName":"Shubham Chauhan","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/shubham-chauhan.jpg","authorDescription":"A passionate legal content writer, a nature enthusiast, an avid reader, and a part-time thinker. By means of conducting in-depth research on industry related topics, Shubham often builds flawless and intelligible legal content for populace from all walks of life.","postViews":5771,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4044"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=4044"}],"version-history":[{"count":17,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4044\/revisions"}],"predecessor-version":[{"id":29353,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4044\/revisions\/29353"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/4046"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=4044"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=4044"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=4044"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}