Cash Flow in the Carpet Cleaning Business
To a business, cash flow is like the air we breathe or the fuel we buy for our cars. It’s easy to take for granted until it is in short supply and like other precious commodities, we tend to overuse it when it is plentiful, and regret our indulgent consumption after the fact. Cash flow problems can occur in any organization from a one person business to a Fortune 500 company.
Cash flow is often misunderstood and rarely used in a practical, systematic way. To add to the confusion, the terms "earnings" and "cash flow" are frequently used interchangeably yet they are quite different. Earnings means profit or net income. Cash flow is based on the timing between the receipt and disbursement of cash.
The ’90s boom encouraged easy credit and lavish spending which became difficult to sustain. The 21st century offers many of the opportunities of the 90’s, but the reins of conducting business are being pulled in slightly. The result is a renewed appreciation for cash flow management and for business owners and creditors alike, cash flow has become a critical focus.
Cash flow has a passive personality and can be easily overlooked when business is booming. Many companies define cash flow in such broad terms as to render it a useless benchmark. But make no mistake, you can go broke while showing a profit! A small business runs on cash, not profits or sales growth. Businesses must have cash for growth and lots of cash for fast growth. You must pay salaries, purchase inventory, meet operating expenses, finance the growth and provide stability in downward markets with cash.
Tips for safeguarding capital and maximizing cash flow management
Improper budgeting can create one of greatest risks to your business’s health...a cash flow deficit. All businesses at some time are either starting or growing. These times can be exciting and enjoyable. But, because it is impossible to accurately anticipate the length of expansion delays or staffing issues, cash flow budgeting becomes critical. Problems arise when capital budgets are too tight and money starts to dwindle.
One option to help avoid this serious problem is to keep your cash available by utilizing your borrowing power. More business owners are leasing which provides them with purchasing and staying power, especially in times when cash flow can become an issue. By leveraging you can accomplish your growth goals and in many cases avoid creating cash flow concerns.
When the time comes to replace equipment, expand your business or if you’re just starting up, find a knowledgeable leasing company that knows the industry well. The right choice can save you money and worry. They should have specialized programs to meet your specific needs. If your current lease company cannot provide funding for the equipment and services you require, perhaps a new lease company could provide broader opportunity and leverage for you.
The streamlined approval process offered by Beneficial Capital Leasing and the flexibility offered in payment structures can enhance your ability to endure cash delays, equipment changes and staffing issues. It can also help reduce the need to sell unattainable quantities of services.
Additional Financing Information for Carpet Cleaning Companies: