By Phil Haney
Cash Flow is one of the most imperative factors in operating a business and its success for today and for the future. It is critical for Sellers to insure that Cash Flow is Managed Efficiently and that action steps are always taken to improve Cash Flow of the business. You may have a wonderful business, think everything is fine with Revenue and Net Profit but the Cash Flow could be suffering from added expenses that aren’t focused on.
Remember, as you all know as Business Owners that Cash is King.
Good Cash Flow is where business management begins with having a clear understanding on where cash enters the business and leaves the business. You have to keep an eye on the short and the long term to insure you don’t become surprised by any cash flow issues and then have your plan to correct these anomalies when they happen.
A lack of profit is one of the main reasons why businesses fail. Sometimes business owners are making a profit but have run into cash flow problems which will ultimately force them into serious financial issues, having to close or sell the business. Cash Flow issues can arise with all businesses whether big, medium or small; especially if there are high business expenses and you are constantly feeding your profits back into your business. You need revenue in your bank account after you’ve paid all the bills and are continuing to build your income and wealth management.
The best practices are to review with your CPA or Accountant/Bookkeeper and Software Systems you have to ensure that you are on top of issues that come up on expenses in the business. Also be focused on customers or clients that provide late payments which cause cash flow issues. Make sure the terms and conditions are in writing and that the customers are aware of the invoice terms and then always follow-up if any delays in the payment schedules.
There are always some unanticipated costs that need to be to handled, so it is good to have some type of cash flow forecast for six to 12 months and hopefully to build some emergency funds. Also have the right insurance for the business for some of those unexpected interruptions in the business.
Then of course fully understand the profit, cash flow and ROI to insure the business financial health and how to handle the taxes.
Prepare for avoiding seasonality if that is part of the business, look at diversification in some areas of the business to improve the cash flow during those times.
There are many significant businesses and franchises that we represent for sale and for buyers looking to purchase the right business. If you are a potential Seller wanting to confidentially sell let us know
Sunbelt is the place to go to buy or sell a business. http://www.sunbeltnetwork.com/bakersfield-ca/