The best approach is to effectively manage your cash flow. Cash flow is the lifeblood of a business, not enough of it causes the business to go borrowing and creating more debt, I don't think anyone will try to tell you that a business can have "too much" cash flow so let's not even go there. By managing cash flow effectively, I mean that the business owner needs to actively measure where the money goes and determine if that money is beng used effectively and efficiently. If not, changes need to be made that will either lower costs or improve the yield on the same amount of raw product or services. The owner also needs to look very objectively at the payroll load as it applies to cash flow...are there too many employees, is the owner taking too much draw from the business, can the owner subsititute his labor for those of "extra employees"? If so, he can reduce the pay out. The other considerations are increasing prices, reducing inventories or improving inventory costs, and also increasing sales volume which in turn increases cash flow and in a more positive way that a price increase. Once this is done, then determine the "free cash" available and invest it back into the business by paying off debt which will in turn improve cash flow. WB
Simply put, money is a game of numbers. If you spend more than you earn, you end up with negative cash flow.
Manage your finances wisely, spend less than you earn and your bank balance will always be healthy. Think before you do any transaction.
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