The management choices for negative cash flow are simple. You can either increase your cash inflows or slow down your cash outflows. The hard part is determining how best to act on your decision.
Maintaining a cash management system allows you to be thoughtful about deciding the best option. Failure to project your cash position week-to-week forces you to be reactive, not proactive, in working through periods of negative cash flow. Don’t do this—choose to manage your cash.
Overview
Negative cash flow occurs when the total amount of cash leaving a business during a specific period is higher than the amount of money coming into the business during that same time.
Negative cash flow is always a risky and undesirable situation. Anytime you’re projecting negative cash flow, you need to immediately address what actions need to be taken to generate and protect cash before you begin to run a higher deficit. Often, difficult decisions must be made to either alter sales and collection processes to increase cash inflows or slow down cash outflows.
Maintaining a cash management system allows you to be thoughtful about deciding the best option. Failure to project your cash position week-to-week forces you to be reactive, not proactive, in working through periods of negative cash flow. Don’t do this—choose to manage your cash.