![]() In reality, however, growth often causes cash flow problems more than anything else, as it relies so heavily on cash. If your business is growing, and your profit increasing, you may expect your cash flow to improve. This is why your cash position and understanding your cash flow is so important. a general downturn in trading conditionsīeing able to adapt to change, however it comes about, is integral to your business’ success.cheaper alternatives entering the market.changes in the price of stock or raw materials.a client being late with a large invoice payment, or not paying at all.It affects businesses of all sizes, and can arise for a number of reasons such as: ![]() In business, some change is a good thing – but only if your cash flow is flexible enough to allow you to adapt. When your business faces significant change, knowing you have enough cash to cover all your costs for at least a month (and ideally longer) is crucial. If they are, it’s important to either reduce spending, or find another source of funding to be able to plug the gap and keep trading. That’s why creating a cash flow forecast is crucial, so you know if any shortfalls in cash are likely. In its absence, any business is likely to perish.Įven an otherwise profitable business can still experience severe short-term cash flow issues – for instance, if it’s incurred expenses creating goods or delivering services while it waits to receive payment from a customer.
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