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Positive Cash Flow Vs. Negative Cash Flow
Positive cash flow and negative cash flow are inextricably related to the business cash flow. If you are running a business, you must have concrete knowledge about these things. Otherwise, it will be difficult to gain profit from your business. If we talk about the present situation, people are preferring online transactions. Therefore, if you want to survive in this competitive situation, you must take your business online. But, when it comes to online business, maintain the cash flow becomes quite easy for you as you will have a lot of upgraded payment terminals with you. But, if you don’t know the important aspects related to online business, it will be complicated for you to enhance the cash flow of your business.
We have already covered the importance of maintaining cash flow in the business. Here, we are going to tell you about the positive cash flow and negative cash flow. So, don’t miss to go through the following points:
Calculation Of Cash Flow
Before getting into positive cash flow and negative cash flow, merchants must understand how to calculate the cash flow. There is a simple formula for doing this. We have added it below:
Cash Received- Cash Spent = The Net Cash Flow
If you are running an online business, you must understand this formula. The difference between the cash received and spent for the business will determine the cash flow of your business. Now, depending upon this formula, you can decide the positive cash flow and negative cash flow.
Positive Cash Flow
When it comes to positive cash flow, the amount of cash received becomes greater than the amount of cash spent on the business. At the end of the month, the amount of liquid money will be on the higher side. For example, if you have started your business with $2000 and you paid $1000 for the business expenses. On the other side, you have been paid $3000 for your service. So, if you see the cash flow, it will remain positive. At the end of the month, you will have $4000.
Advantage Of Having Positive Cash Flow
There are many advantages that you can avail of if you have positive cash flow in your business. We have highlighted these below:
Easily Pay Your Business Expenses: Well, if you have positive cash flow, you will able to pay the business expenses very easily. Your employees will get their checks on time. Moreover, you can upgrade the equipment so that you can accept credit card payments online. It will increase the amount of liquid money in your business.
Endless Opportunities: When you will have cash, you will be able to grab more opportunities. Yes, when you have cash, business investors will show their interests and they will invest in your business. It will help you to take your business to the next level.
Survive In the Worst Time: If you have access to money, you can easily deal with the worst scenario. Worst scenarios refer to the damage of business equipment, changes in government regulations and many more. Moreover, if clients do not make bill payments on time, you will not have problems.
Negative Cash Flow
Negative cash flow reflects the opposite scenario of positive cash flow. In such a scenario, the amount of cash spent on your business will be greater than the amount of cash you will receive. You will not have enough amount of liquid cash in your bank account. Well, negative cash flow is a common situation. But, having a negative cash flow for a long period of time will be a major concern. You have to find out new ways to deal with it. Otherwise, it will be very difficult for you to continue your business.
For example, if you started your business with $4000 and your business expense is $5000. The amount of money you have been paid is $500. So, in such a situation, you are going through negative cash flow. The net income will become -$500. When you don’t have enough money in your bank account, your check will definitely bounce. You will not be able to grab new business opportunities. So, if you running an online business, you must keep the business cash flow on the positive side.
Advanced Payment Terminals
Well, if you have advanced payment terminals, you can maintain the cash flow very easily. Moreover, you will be able to keep it on the positive side. We at International Payment Solutions offer various types of advanced payment terminals such as virtual terminal, credit and debit machines and many more. It will definitely keep you on the safe side as your business will be able to accept all forms of payments from the customers.
Not An IPS Merchant?
So, you have probably understood the difference between positive cash flow and negative cash flow. Now, if you want to take your business to the next level, you must pair your business to the merchant processor solution such as International Payment Solutions. IPS is one of the best payment processors and therefore if you want to achieve good results, you must become a merchant of IPS.