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Positive Cash Flow- Smart Use of Cash for Small Business


Cash_is_flowing-_blog_Resize.jpgUnfortunately, when we discuss cash flow, it is often when a business is in a crunch and needs to know how to meet payroll or if they’re going to make another 6 months. But what happens when smart business owner’s hard work finally pays off and the cash starts to flow? Business is performing wonderfully; they’ve optimized back office processes, gone paperless, and reduced overhead costs by negotiating vendor agreements. In addition to cutting costs, they’ve been successful in increasing the number of clients they serve and cash reserves are actually starting to increase? So, now what?

First things first - if this scenario rings true for your current business situation, then our congratulations on being a smart CEO. Hopefully, if it’s time to ask what’s next for your business, you’ve already taken the next step of sitting down with your CFO or financial advisor and have mapped out multiple scenarios. You’ve run cash flow forecasts so you know what to expect over the next couple of months, even years. You have liquid cash on hand for emergencies and you’ve saved a lot of capital too. Once all of these essential business objectives have been taken care of, and you still have extra cash left over – what can you do?

Here are two things to do when your business is bringing in cash like crazy:

1. Review Your Human Capital

When your cash flow is healthy and strong, it is time to take a look at your staff. Are they working overtime because of the extra influx of business? Are they feeling the strain? Run job costing reports to understand performance and profitability. Then consider one of these two scenarios (or both).

  • Incentivize Your Current Staff

Your team has done an excellent job dealing with the influx of business at your company, however, they may be feeling overworked or burned out from putting in extra hours to keep everything running smoothly. If your staff has gone above and beyond, consider taking some of the extra cash and offering rewards. Adding to your fund for employee bonuses is one method. Another option is to purchase gift cards or throw a staff appreciation party. Let your employees know that their work is greatly appreciated.

  • Hire More Staff

If after analyzing your staff you realize that your current staff is barely able to keep up with the current level of demand your business is getting, then it’s time to hire more staff. With the extra cash coming in, you have room in your budget to hire an additional hand or two to help take the burden off of your current staff. Plus, hiring additional employees helps you to take on even more work – which could mean a win-win for both the business and your employees.

2. Assess Technology & Infrastructure Improvements

Outside of your people, what else needs funding? Is it time for technology upgrades? When you have extra cash on hand, making investments to improve your business is a smart move. Upgrading aging equipment allows your staff to work faster and more efficiently. Is it time to subscribe to SaaS products that will help your teams perform better? Time to put some speed into the office WiFi? Or perhaps the conference rooms could use video conferencing systems?

A healthy cash flow coming into your business is certainly a sign of success and by no means a problem, but it does mean your business needs to be prepared to take advantage of the opportunity and make the most of a good situation. Reinvesting in your people and technology that enables them almost always yields dividends.

The CEO's Guide to Improving Cash Flow

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