Keeping cash flow steady helps your business stay afloat. Turning sales into cash receipts provides funds to pay employees, suppliers and expenses.

If you’ve recently started your business, finding the balance between cash receipts and cash outlays can be challenging. You’ll need insights into key areas such as:

  • how much inventory to carry
  • the delay between sales and receipt of payment
  • supplier payment terms

When you understand the ebb and flow of cash flow over time, take these steps to improve and maintain a steady stream of cash.

Improving Cash Flow

  • Use Short-Term and Long-Term Financing – Lines of credit temporarily boost cash flow to cover inventory build-up or receivables slow-downs. Finance large capital expenditures like equipment or facility expansions with long-term loans.
  • Change Collecting Processes – Offer discounts for early payment or provide a shorter payment window to narrow the gap between sales and receipts.
  • Sell Unused Assets – Excess inventory or idle equipment can be sold to reduce storage costs and get quick cash.
  • Maximize Payable “Float” – Use all available time to pay suppliers (without damaging your credit rating or relationships) to build cash reserves.

Maintaining Cash Flow

  • Anticipate Risks – Quarterly or bi-annually, review the business landscape and develop a plan to address threats.
  • Separate Business and Personal Accounts – Although personal savings often fund a new business, opening business accounts protects personal cash flow and establishes credit history for the company.
  • Watch Inventory Levels – A lean approach to inventory management will reduce the cash tied up in hard goods.
  • Keep Cash Reserves and Invest Surplus – The “rainy day” fund will take care of the unexpected. And opening an interest-bearing account puts surplus cash to work.
  • Track and Control Expenses – Monitoring costs for supplies, utilities, and rent can identify opportunities to make operational improvements and save money.

Turning your profit into cash gives your business the flexibility needed for growth. Talk with the team at Value Capital Funding to learn how we can help you get the working capital you need.