Cash flow is a critical aspect of your ABA business, and its importance cannot be overstated. Cash flow refers to the movement of money in and out of your business, and it is the lifeblood of your ABA model being successful.
1. It provides a clear picture of the business's financial health
Cash flow statements help business owners to assess their financial health by showing the inflows and outflows of cash. This information enables you to make informed decisions about operation, such as investing in new equipment or reducing expenses. I.e. Imagine planning to expand into a clinic space but you aren’t sure if you will have the start-up cost to begin. Understanding your current cash flow can give you a good idea of when you will be able to have the start-up cash necessary to begin.
2. It helps to ensure that bills and expenses are paid on time
Cash flow enables your ABA Business to pay their bills and expenses on time, which is critical for maintaining good relationships with suppliers and other stakeholders. Putting vendor relationships at risk can really hurt your business but even more important is your employees. Since your biggest expense for your ABA Business is your Payroll, you want to make sure your people are compensated on a timely basis. For many ABA providers who use insurance companies as funders, payments may take 30-45 days after rendering services for payments to deposit so having good cash reserve will give you the peace of mind to run a smooth operation.
3. It can help your ABA Business plan for the future
Cash flow projections enable businesses to plan for the future by providing insights into how much money they will have available to invest in new projects or cover unexpected expenses. Imagine running your ABA Business but don’t know when to decide on hiring a new BCBA or admin role or even when to open new locations. Having a good handle on your cash flow will help you with planning on these future events.
4. It helps your business when trying to obtain financing
Lenders and investors often use cash flow statements to assess a company's financial health and ability to repay loans. A positive cash flow statement can help businesses to obtain financing at favorable terms. If your ABA Business is in a situation where you need additional capital to expand or simply weather an upcoming storm, you want lenders to offer you the best terms that will ultimately mean less cost for you. When lenders see that you have good cash flow they are more likely to give you favorable terms.
5. It helps you to manage working capital in your business
Cash flow management helps businesses to optimize their working capital by ensuring that they have enough cash on hand to meet their day-to-day operational needs. Having 3-6 months of operating expenses on hand will help your business through difficult times.
Overall, cash flow is crucial to the success of any business, as it enables business owners to make informed decisions about their operations, maintain good relationships with stakeholders, plan for the future, obtain financing, and manage their working capital effectively.
Keep your ABA Business at the front of the industry by managing your cash flow efficiently!
At AgileTech Accounting and our Partners we believe in your ABA Business have a finger on your cash flow at all times. We have helped our clients not only track the inflow and outflow of cash but make critical business decisions like hiring and expanding when it is right. If you want to learn more about our process, please don’t hesitate to contact us here.