Ways that poor cash flow impacts on a business

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Cash flow issues can have a negative effect on a company, even if the profits are reasonably healthy. Your firm may be affected in ways other than financial, which can be just as devastating. If you have more money leaving the business than coming in, you may struggle to pay your own bills and will be unable to invest in future of your enterprise.

Borrowing more money

Although a short-term overdraft or a small loan may be the solution to a temporary problem with cash flow, in many cases it will just lead to more debt, higher interest charges and an extension of your credit. Borrowing more money won’t fix the problems, but it could certainly add to them. A healthy cash flow will reduce the likelihood of borrowing, so you pay less interest. In an ideal situation, all your clients will pay promptly so that you can settle your bills in a timely manner.

Problems with suppliers

If you have issues paying suppliers due to a poor cash flow, you may find that relationships with them decline. If you have problems with clients paying you, this could mean that you have to miss a payment, which in turn will affect your entitlement to credit.

Morale of workforce

If you are experiencing difficulties with cash flow, you are likely to be stressed. Your workforce will notice this and could also become tense. If there are concerns about you being able to pay your suppliers, which could have an adverse effect on your business, employees may start to wonder about their own job security. This can affect staff retention and absence rates, ultimately affecting productivity.

Losing customers

When staff are feeling the pressure of problems at work, they may not be as responsive to customers. Bright and cheery staff who are helpful to clients will generate a positive feeling, encouraging customers to make purchases. If employees are feeling low due to concerns over the future of the company, they are likely to be less helpful and pleasant to customers. This could result in lost custom, which will have a huge impact on an already struggling cash flow.

Controlling cash flow is crucial for a successful company. Management outsourcing is just one way to ensure your cash flow is free of problems, making it possible to build the company and reap the rewards of a thriving commercial venture . For more advice, please call us today.