Strong Cash Management for Steady Cash Flow | Chase for Business

 

Cash flow is an easy enough equation. It’s a reflection of a business’s inflow or cash received versus its outflow or money spent. You may have heard these referred to as accounts receivable and accounts payable.

Let’s keep things simple.

If your business makes more money than it spends, it has a positive cash flow . If the opposite is true, then your business has a negative cash flow. Neither state is permanent, and cash flow can fluctuate throughout the year because of factors such as your industry, sales cycle, supply chain and one-off expenses.

Creating cash flow is less an active business decision and more a natural occurrence in the business cycle. When trying to overcome negative cash flow problems, one obvious option is to increase profits. But that’s easier said than done. Which is why businesses tend to focus on the other side of the equation — reducing expenses.

Reducing expenses by cutting costs may seem like the simple solution, but the implications can be numerous. Let’s dive deeper into how businesses can reduce their outflow and examine how effective cash management can help create cash flow.

 

It’s a trim, not a shave

Cutting costs can sometimes be confused with eliminating them entirely. “Reducing costs” may be a better way to phrase it, and it comes with a lot of potential options. Here are a few.

 

Leasing

Supplies and equipment for production, land for buildings, inventory for sales. Many businesses opt to purchase these items. But for cash flow purposes, leasing can provide a positive boost because it results in smaller, scheduled payments, leaving cash for more immediate business needs. Plus, lease payments can be written off as a business expense on your taxes.

 

Reviewing expenses

Certain recurring expenses are the cost of doing business and are included as accounts…

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