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FAQ: Cashflow Questions

What is Cash Flow?

Cash flow represents all money coming in and going out of a business each month. Incoming cash flow includes money earned through sales, investments, and financing. Outgoing cash flow includes money spent on all operating expenses including marketing, inventory, wages, shareholder dividends and debts.

What is a Cash Flow Issue?

A cash flow issue means that a business doesn’t have enough money to pay its expenses. Cash flow issues develop when a business’s expenditures are higher than its income. Cash flow issues can be short term and occasional or ongoing. Small businesses that experience seasonal fluctuations in sales activity are especially prone to experiencing cash flow issues.

What Causes Cash Flow Issues?

Cash flow issues are caused when a business’s expenses and debts outweigh its incoming revenue. Cash flow issues can be short term or ongoing, and need to be resolved for the business to be successful. The most common causes of cash flow issues result from businesses operating with insufficient working capital, failing to forecast, and running out of money.

What are the Most Common Causes of Cash Flow Issues?

Other common causes of cash flow problems include unexpected or fluctuating variable expenses, a slower than expected sales quarter, or late payment from customers. The most common causes of cash flow issues are mostly avoidable by maintaining a monthly cash flow forecast and establishing a cash flow reserve (aka: “saving for a rainy day”).

What are the Signs & Symptoms of Cashflow Issues?

The most common signs & symptoms of cash flow issues include running out of money mid-month, not being able to pay all monthly expenses on time, having to delay ordering new inventory or scheduling a repair, and not being in a position to take advantage of time-limited opportunities and improvements that could help grow the business.

Other common signs & symptoms of cash flow issues include:

  • Unsustainable overhead costs.
  • Inability to pay all monthly expenses.
  • Sitting on excess inventory.
  • Slower than expected sales performance.
  • Unexpected expenses and losses, including damaged, returned or stolen merchandise.
  • Aging accounts receivable.
  • Inaccurately pricing products and services.
  • Overly optimistic financial forecasting.
  • Inability to pounce on opportunities.

How to Increase Cash Flow?

Short term business loans are one way small businesses can resolve their temporary cash flow issues while they work on opportunities to increase revenue, attract investors and lower their variable expenses.

What are Ways to Increase Positive Cash Flow and Profits?

  • Running promotions to attract new cusomers and move merchandise.
  • Upselling or cross-selling to current customers.
  • Accurately forecasting expenses and peak sales opportunities.
  • Staying on top of accounts receivable and making it as easy as possible for customers to pay you.
  • Working with debtors and suppliers to extend your repayment terms.”
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