More cash is not always the answer to cash flow problems

For many small business owners (SME) it is tempting to think that a cash injection is the answer to their cash-flow worries, but there are many much deeper reasons that go right to the core of the business. The SME’s need to be focused on reporting the monthly key financial information much the same as the larger corporations do.

This discipline helps to build stronger financial confidence moving forward and will help to maintain cash flow in focus and provide the managers and owners the vital information about the overall health of the company before there are cash flow problems.

One reason for the regular reporting is the confidence it inspires at the board and stockholder levels. Small businesses can operate in the same way and funding providers or business angels will be more apt to talk business with a business that takes a sensible approach to financial information reporting.

The process needs to be automatic and not onerous. Keep invoices updated for both suppliers and customers, value stock, check debtor days, compare actual sales against forecast budget. These and other things must be done buy are pretty straightforward once a monthly routine has been established.