When your business is thriving, hardly you worry about cash flow problems. Well, you have every reason in the world not to stress yourself about dilemmas that aren’t there. Even if this is true, however, it doesn’t mean you should rule out the possibility that your financial resources would drain. Your strategy may be working right now, but a single poor decision is enough for things to go sour.
Unless you’re wary about these subtle signs early on, you’d reach a point when it’s hard to stop negative cash flow from happening:
Hiring more people than you’d really need is a common mistake. Taking on additional employees can be a sign of growth, but sometimes it’s a trap you set for your business to fail. Employing more than you can afford can definitely put you in a dire financial situation.
If your production grew, think if recruiting new talents or better staff management is the solution to get everything done on time.
Engaging in more businesses than your market demands can place a strain on your otherwise positive cash flow. Just because your first store is profitable it doesn’t mean putting up a second one in the same area could double your revenue.
Before making another investment, always study whether the market can deliver the sales you’re expecting or not, itp.co.nz says.
It may not be obvious at first, but steep overheads would catch up with your high sales and inevitably hurt your cash flow. Good sales is sometimes an illusion that you’re making money, overshadowing the looming negative cash flow.
Without having a professional accountant in your team, it’s hard to forecast this setback and rethink your strategy early.
Positive cash flow is always worth celebrating, but without financial imprudence, it’s impossible to sustain growth and prevent insolvency.