By Irfan Khalil on September 9, 2016
In order to operate a business “successfully,” one needs to be strictly clear about the present conditions of his business. Knowing what’s actually working for you, what is an obstacle in the path of your success is imperative for increased sales and cash flow; as these are important elements of a business. The level of your recent sales and what you expected from your business should match.
It’s all about cash flow. What’s going up with your profits? Are they increasing? Or are they the same? What is your return on investment? What is your return on sales? What is the percentage? You need to know everything about such things to determine the strategies for the future of your business. You need to put yourself in front of the harsh realities. Not everything is always good when it comes to operating a business. You need to ask yourself the brutal question. Why isn’t your business already a success?
What’s really important is that you should know the answers to these questions. If you don’t know everything about your business, you are in trouble, which can lead to losses in your business.
You might have perceived the saying “cash is king”. It’s true. This is because if you have cash you are in a stable position and have good purchasing power. Even though bank loans have made things really easy but if you have cash you are not prone to getting a default. Cash position and cash flow are two different things. Cash position indicates the amount of cash you have in hand, however cash flow represents the ability to generate cash.
Getting a loan to get operate your business decreases your ability to generate cash flow in the future. It is equally significant to have a positive cash flow in the future of your business as well. Hence, for a better and positive cash flow, effective debt management is vital. While a good cash flow lets you manage your debt, it also provides your business with the power of growing. A good cash flow can lead to future investment for the growth of your business. When it comes to development, one does not hesitate in investing. It’s important to have a good cash flow because a business needs to be operated in a strategic way, not in a defensive way which can lead to its downfall.
Cash flow is also important for the flexibility of your business when it comes to critical decisions. When you are really confident about your cash flow, you possess the buying power when it comes to critical purchasing. With a good flow of cash, more lenders get attracted towards your business if in certain situations you require a debt.
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