Any business owner will tell you that cash flow is important for a healthy business. Positive cash flow allows you to pay your employees’ wages, get business supplies and maintain your business so you can continually attract new–and retain old–customers.
But cash flow is important beyond simply maintaining the status quo. A positive cash flow makes both strategic and opportunistic growth possible.
Cash Flow for Growth
With a positive cash flow, a company is set up to grow on their own terms, when and how they want, while growing relationships with both customers and investors.
Avoid Taking on Extra Debt
When an organization is looking to grow, but they don’t have the cash on hand to purchase supplies, hire people or add locations, they look to borrow the funds to make these plans possible. But when you take on debt you add other voices to your growth plan. If, however, you have a strong positive cash flow, you can avoid bringing in outside funds and keep complete control of your growth plans.
Make Yourself More Appealing to Lenders
Sometimes your growth plans are bigger than your current situation can accommodate. In those instances, having a strong, positive cash flow will make you more appealing to potential lenders.
Win New Customers
Organizations with available cash can expand their sales and marketing efforts as needed to support adding new customers. But knowing you have cash available can help grow your customer base in other ways as well. A highly desirable new customer may want to work with you but needs expanded or custom credit terms. When you have a strong cash flow and cash management procedures in place, extending special credit terms for an attractive new customer or customers becomes possible.
Flexibility
In today’s business world, customer demands change fast, and opportunities fly by. With a well-managed cash flow, you have the capital to seize these opportunities when they arise. So, if your customers suddenly want a new product in your stores, you can easily order extra stock. Or if a competitor is looking to sell their company, you can leverage your available capital to make an offer (before someone else does).
Improve Investor Relationships
Your investors had confidence in you and your business ideas. Enough confidence that they were willing to put up their own money to help you build a profitable business. A stable cash flow allows you say thank you to your investors in the form of dividends. Paying out dividends can keep your investors happy and interested in continuing to fund your growth.
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