What are the benefits of good cash flow in your business?

Financial stability in a business is the difference between staying afloat and being overtaken by competitors. Every day that your nearest rivals can invest and grow their companies because they have reasonable cash flow, and you can't because your cash flow is poor, will be a step backwards. Eventually, you could end up losing customers and even more cash flow, and from there it's a fast downward spiral.

Your personal financial situation could suffer if your business cash flow drops. To find out more about your credit history, request a copy of your Equifax credit report.

What can healthy cash flow help your business achieve?

Your personal financial situation could suffer if your business cash flow drops.

With consistent cash flow in your business, you'll be able to grow and invest as you see fit. You don't have to wait around for income increases in order to pay bills (or avoid falling into other debts), and if you need to, you can hire extra staff.

More staff on the floor means you can produce more, or provide more services in the same timeframe. That means increased potential for cash flow, and will help you to stay ahead of the competition.

How can you improve cash flow in your business?

The easiest way to improve your cash flow is to plug the holes that are causing you trouble in the first place¹. Make sure your accounts are in order and that you keep accurate records of everything¹ - from that point, you can see any problem areas and come up with solutions.

A cash flow forecast can help you to see potential problem areas in your business.

A cash flow forecast gives you a detailed overview of all the money you expect to see going into and out of your business over the next 12 months². This could help you to anticipate months when you will potentially struggle to pay bills (such as around Christmas time when many people take annual leave). By forecasting these pressure points throughout the year, you can make sure you're ready for them by hiring temporary staff or reducing overheads well in advance.

By solving your problems before they even become issues, you won't see significant drops in cash flow and you won't be forced to take out business loans that could ultimately affect your credit report if you're unable to pay the money back.

For more information about how your business could be impacting your Equifax commercial credit report, check out My Credit File's business offerings today. 

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.

¹Business Victoria, Infographic: Cash flow and keeping the money coming in. Accessed May 2017.

²NAB, How to use cash flow forecasts. Accessed May 2017.