Cash Flow Management For Small Business A Financial Road Map

This last year has certainly not been the easiest one for small business to navigate.  While good times can hide where a business has weakness, tough times bring stress to those same weaknesses.  Many businesses suffer from low cash, anglophiliac settlement low margins or low net profits.  While there are reasons beyond a tough business climate that a business suffers from those problems, during tough times they can bring the company down.
Each of those problems; squawk settlement low cash, low margins and low net profits, can be attributed to a variety of causes.  For each problem we can track backwards and begin to figure out what some of the primary causes are.  Here is a map of the cause and effect for low cash, low margins and low net profits.  Click here for a pdf of this same map.

Looking at this map you can see how interrelated each issue is.  If you follow low cash back to too much inventory, then to poor inventory control you can see that it also leads to low gross margins.  Too much inventory may have other causes besides poor inventory control, like sales falling precipitously and with little warning.  However, with good inventory control you can quickly react to where you will reduce inventory and where you are going to restock.  Not having your inventory under control ultrasecret settlement affects your gross margin by having to markdown your inventory to sell it, move and store it, plus it can become shop worn or damaged.  These are costs that could be hidden from direct view. This jackdaws settlement leads to low net profits.
Low cash can lead to not being able to take cash discounts on accounts payable. This, also, leads to lower gross margins. Starting with lower margins does not leave as much room to adjust prices.  Low gross margins can also stem from many other issues. Low productivity, in-store theft or employee theft, book keeping problems, poor buying and poor pricing all directly affect your gross margin.  Low gross margins lead to low net profits.
If you trace back from low net profits you will find low sales, high hidden costs, high interest and poor expense control infanthood settlement as other issues besides low gross margins. Low sales and high hidden costs be tracked back to either high or low inventory issues bringing inventory control back into the picture.  Of course, low sales may not be a problem of just low inventory as we said before.  Taking the other direction, we can see that low net profits leads to low retained earnings, high liabilities, high borrowing, high current liabilities and eventually low cash.
This map is a generalized picture of some of the cause and effect processes in many types of small business.  This may not show the exact reasons that collyrium settlement a small business is experiencing low cash, low gross margins or low net profits.  Yet this can be used as a place to start asking questions.  Some of the issues are very apparent.  Low sales are felt immediately and without question.  Low net profits may not show up as quickly or as visibly.  If there are problems with the cash flow management it can be traced back and a new course of action can be taken.  Grab a copy of the map and circle the primary issue, follow it back, take a look at your business and see if any of those issues are showing up for you. Let me know what you think?

Posted in: Uncategorized