When a business says they don’t have any cash on hand, it’s like someone telling you they don’t have air in their lungs. Cash flow is the lifeblood of a business, but many small and medium-sized businesses frequently find themselves on life support. Even worse, it’s often through no fault of their own.
Let’s say the worst happens, and you find yourself with a primary cash flow shortage. First, it’s important to understand exactly what a cash flow gap is. A cash flow gap can be defined as the time between inflows and outflows of capital for your business when the two numbers do not align. An example of this would be when a company makes an investment in inventory for a client order, but then waits for them to pay it back.
As you might imagine, this can pose a tricky situation for small and medium-sized businesses relying on getting paid for their services in a timely manner.