As our children create their Christmas lists of toys they want the most, business 
owners are creating lists of their own. While they may also include some toys, perhaps Google Glass or the Apple Watch, a healthy and successful business is #1 on the list for most.
One of the best ways of measuring business health is cash flow. Healthy cash flow doesn’t necessarily mean making a lot of sales – although that helps. What you should be seeing when you look at your cash flow is more cash flowing in versus flowing out. This signifies healthy cash flow and solid working capital.
For many business owners, the holidays represent increased demand on working capital. Customers are buying more online and in stores as part of the holiday gift-giving tradition. This often means buying on credit versus paying with cash. While increased accounts receivable look good on the balance sheet, it does not equate to cash in hand. Instead, you are paying more for production, labor, inventory and related operational costs, while waiting to get paid. Hence, more cash is flowing out than coming in.
Fortunately, there are multiple ways a business owner can alleviate much of the stress that comes with this seasonal imbalance in cash flow.
- Have a Plan | The most efficient way is to have a plan. Spending decisions should always be made with caution in business. By planning strategically ahead of time for periods where you expect cash flow demands to be heavier, you can be better prepared to handle it financially.
- Negotiate with Suppliers | Negotiating supplier credit is another way to reduce cash flow demands. Making purchases on credit allows you to continue to meet customer demand, but with a lower immediate cost, freeing up cash flow.
- Leverage Accounts Receivables | Work with a factoring company such as PMF Bancorp. Instead of waiting for accounts receivable to be paid off, invoice factoring allows you to gain immediate access to that cash flow. Not only does this increase your working capital, but it also reduces the risk of unpaid invoices.
The holidays are time to celebrate, not worry about your business’s health. By planning ahead and having the right strategies in hand you can make it through the end of the year on a positive note and start the New Year off right.
