Managing your cashflow is crucial to running a successful business. Running out of liquid capital is one of the most common reasons that small businesses fail. Monitoring your cashflow and planning accordingly is important at every stage of the business lifecycle; however, it is especially critical that businesses experiencing rapid growth remain acutely aware of their cash availability.
The point at which many business owners trip up is in failing to realise that even a thriving and profitable business can easily run out of cash. If you believe that your cashflow might become negative, meaning that your expenses may exceed your takings over a specified period, then you should investigate opening a line of credit for your business.
You should be firm and clear with customers and clients about when payments are due. Issue invoices immediately and have a system in place that will send out a reminder if payment has not been received by the specified date.
If you are experiencing a shortage of cash, then you should be open and honest with your creditors. There is a good chance that they will be amenable to a payment plan, so long as you discuss the issue early on.
This article is part of our monthly SME Pathways newsletter.