Positive cash flow is one of the most valuable traits of a company prepared to survive the peaks and valleys of business cycles. For example, the used car boom of 2021 has become highly profitable for dealerships that effectively manage their contracts-in-transit while waiting for loans on sold cars to come through. Proven Media Solutions founder recently Dustin Siggins explored how businesses from car dealerships to mom-and-pop restaurants can create operational efficiencies to improve their cash flow and prepare for growth opportunities.
In his Forbes article, Dustin notes the relationship between cash flow and operations is heavily intertwined. Positive cash flow indicates a company has developed the processes to more efficiently bring in revenue, while negative cash flow indicates a company has inefficiencies that lead to delayed revenues. With payment obligations to landlords, vendors, and employees, these inefficient businesses have little left over to invest in scaling their business operations.
However, businesses can increase cash flow by making simple changes in operations. Taking more payments up-front, building faster customer processing systems, and creating additional revenue streams that reduce the impact of slow seasons are strategies that can be implemented by many businesses.
Dustin’s article, which also ran in Zenger News, also illustrates how companies with positive cash flow take on less debt and are better prepared to invest and grow as economic conditions change — sometimes on a dime, as happened last year. There’s no better example of why this matters than the car industry–just months after not having a single customer on the lot for several weeks, dealerships now struggle to keep inventory on those same lots.
Read the full article here.