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You don't have to be a small-business owner to understand the importance of cash flow.
Anyone who's ever found themselves holding off on paying a bill until a check clears in their bank account is familiar with the basic premise of cash flow: You need to manage the money coming in to ensure you have enough on hand to cover your regular spending as well as unexpected expenses.
In small business, cash flow involves just about every aspect of your business from payroll to accounts receivable, to inventory and purchasing. When thinking about cash flow, it's important to consider such areas as effective billing practices and collections to ensure a steady influx of cash; establishing and maintaining good credit to cover unexpected shortfalls; and managing your spending -- including payroll, purchasing, and overhead costs -- to keep expenses in line with your income.
As with many areas of small business, the best defense against a cash flow crisis is a good offense.
Examine your billing practices and spending habits to see what can be done to maintain a regular cash flow. Plan ahead to establish cash reserves and credit opportunities that can help protect you in a crunch. And make a consistent effort to increase your cash flow by increasing revenues and decreasing spending.
A healthy cash flow not only gives your business stability in its current operations, but it also gives you a position of strength from which to plan for future growth.
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