As a conscientious business owner, you know that staying solvent is crucial to your survival. Granted, overall profitability is important. Keep in mind, though, that positive cash flow is the foundation of a healthy enterprise. Think of cash flow as the net amount of money moving in and out of your business at a given time — a snapshot, if you will. Most businesses track it monthly. Optimizing the timing of sales relative to expenses is key. What are some of the main reasons why positive cash flow matters? Read on for several. 

1. Anxiety Reduction

When growing a business, there’s little that’s more stressful than running into issues with money. It can affect every aspect of how you show up for work. By keeping careful track of cash flow and optimizing it, you will take control instead of passively allowing the situation to control you. 

2. Accurate Assessment

You will get a more accurate and nuanced read on the financial health of your company by managing your cash flow properly. Your budget is another thing; an estimate of inflows and outflows. It’s a rough sketch, as any estimation is. Cash flow projections give you the detailed information you need to prepare effectively for the future.

3. Increased Trust

If you’re planning to apply for a small business loan, keep in mind that a lender will first look at the patterns and health of your business’s cash flow. It makes perfect sense; a lender wants to be certain you’ll be able to pay the loan back. If you demonstrate you manage your cash flow effectively, they’ll be more likely to trust you. 

4. Accurate Predictions

Being prepared for the unexpected is a hallmark of a successful business. Managing your cash flow properly will help you immensely in this area. Inevitably, cash inflows and outflows vary from month to month. Get ahead of the game by identifying seasonal (and other) patterns that are evident in your cash flow fluctuations. 

5. Room To Grow

Usually, business profit goes right back into the business to stimulate growth. But even if your profit/loss statement shows that you made a profit during a given month or week, you may not have the money in hand yet. By keeping a close watch on cash flow and aiming toward being cash flow positive, you’ll be aware of exactly how much you have and how much is coming in. 

Managing cash flow is a critical factor affecting the success of your business. Keep these points in mind as you make your financial plan.