The answer to this question is one that has haunted small business owners: cash flow. A company can look good on paper, bringing in consistent revenue and new clients, while still coming up short at the end of the month. This phenomenon ties back to cash flow: the flow of money coming into and going out of the business. When more money goes out of the business each month than comes in, the business has negative cash flow. Here are some ideas to turn your business into a cash generating machine!
The first place most of us think about is increasing sales. Adding more customers, picking up additional contracts, and providing add-on services are all means of increasing the amount of income the business receives. With that said, remember that only the net profit from those additional sales translates into additional cash in your bank account. There are a lot of hidden costs associated with increased sales that can result in less cash than you were hoping for. Remember, increasing sales by $ 100 may only increase your net profit $ 30, after deducting the additional costs that generated the additional $ 100 in sales. Operating Costs such as labor costs, material costs, gas, equipment maintenance costs and the like all reduce the amount of each sale that ends up in your bank account.
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