Planning is great but it is impossible to predict everything that can happen to your small business. You need to plan every small move to ensure your business stays afloat even in unpredictable times. Spending and investing without planning can have grave ramifications for your small business. For example, if you invest the profits of the previous month and you realize you are unable to meet your target this month, this can lead to negative cash flow. If you don’t review and analyze your cash flow statements, then you will have negative cash flow sooner rather than later. Some of the most common are as follows.įinancial planning is vital for businesses to sustain in the long run. Negative cash flow can occur due to a variety of reasons. What are the reasons for negative cash flow? Seasonal products and expansion to new markets are some reasons why a business can experience a negative cash flow. Many businesses have periods when their expenses are surpassing their revenue but they are doing well because they are making profits at other times of the year. However, that doesn’t mean that well-established businesses won’t have a negative cash flow situation. Startups are likely to experience negative cash flow in the initial months of their operations because they have just invested in resources and they are yet to make profits. However, trouble arises when your business has negative cash flow for a long time. Negative cash flow is not bad if it is short-term. Monthly cash flow report in TallyPrime showing positive and negative cash flow Is negative cash flow bad? If you feel your business is experiencing unmanaged negative cash flow for months on end, it is time to make changes before you incur losses and have to sell your business. Negative cash flow is normal as long as it isn’t long term. Almost all businesses have negative cash flow at some point because the expenditure exceeds revenue. This means you had a negative cash flow of $5,000 in August. For example, let us say your revenue was $20,000 in August and your expenses were $25,000 during the same month. Negative cash flow is when your business is spending more than it is earning in a given period. 4 ways to recover from negative cash flowĬash flow is the real cash that is available in your business.How does negative cash flow affect small businesses?.What are the reasons for negative cash flow?.