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How Can I Improve My Business' Cash Flow


by Debi Enders

Although a business owner’s financial focus is often on profits, the biggest threat to a business is not a lack of profit but a lack of cash flow. To avoid threats brought on by lack of cash flow, proper cash flow analysis can be employed. Here are a few ways to manage your finances smarter and improve your company’s cash flow.

Scrutinize your cash flow statement. Know where you stand and project your income and expenses at least three months ahead. That way you’ll be better able to make decisions that will help stave off potential shortfalls.

Let technology help. You may have more power over your business’ cash flow than you think. For example, if you haven’t set up an online store that accepts credit card payments, you’re missing an opportunity to receive immediate payment for purchases, while also expanding your potential customer base.

Control the timing of payables. This day-to-day information can help you avoid shortages by letting you know when to liquidate an investment or borrow on a line of credit. Conversely, daily cash management also helps you to recognize where there’s excess cash on the books, giving you the opportunity to use that cash to pay down a loan or invest a portion of your account to earn additional income.

Once properly using a cash flow analysis, understanding the business cash flow can be beneficial from several aspects. It can identify cash management needs, cost control opportunities, and customer/vendor concentration concerns.

Debi Enders (debi.enders@commercebank.com) is assistant vice president, small business banking at Commerce Bank.
Submitted 10 years 60 days ago
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