MUMBAI: Many MSMEs struggle with cash flow, which can hinder their ability to invest, grow, and navigate economic downturns, notes Shriram Finance, a leading Non-Banking Finance Company (NBFC) in the country.
Cash flow, the lifeblood of any business, is especially critical for Micro, Small and Medium Enterprises (MSMEs), the NBFC says.
Why Cash Flow Management Matters for MSMEs
Cash flow refers to the movement of cash in and out of a business. Positive cash flow indicates a healthy business, while negative cash flow can lead to financial strain. Here’s why cash flow management is crucial for MSMEs:
Ensures Business Continuity
Unexpected expenses or delays in receiving payments can disrupt operations. Strong cash flow management safeguards against such disruptions, allowing MSMEs to meet their financial obligations and continue functioning smoothly.
Facilitates Growth
Growth often requires investments in inventory, equipment, or marketing. By managing cash flow effectively, MSMEs can identify surplus funds for strategic investments, propelling business expansion.
Improves Creditworthiness
Financial institutions assess a business’s health based on its cash flow. Demonstrating consistent positive cash flow strengthens an MSME’s creditworthiness, making it easier to secure loans for future needs.
Enables Informed Decision-Making
Cash flow analysis provides valuable insights into a business’s financial performance. This allows MSME owners to make data-driven decisions regarding pricing, inventory management, and resource allocation.
Loans can solves cash flow challenges faced by MSMEs and thus they could be empowered.
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