In order to survive, businesses must ensure that payments aren’t going out faster than resources are coming in. According to a recent study, however, not all businesses are following that formula: companies that do monthly cash flow planning have an 80% survival rate—more than double the 36% survival rate for those only planning once a year.
This discrepancy is partially because careful planning enables your company to build up a solid cash reserve, and that reserve can serve as a life vest when you experience poor supplier performance, forecast errors, transportation breakdowns, weather disruptions, or other unexpected obstacles.
Supply chain processes are the backbone of any company’s cash flow. Unfortunately, your supply chain can fail for a laundry list of reasons. According to a recent National Center for the Middle Market report about resilient supply chains, most companies will face a supply chain crisis every four to five years. A crisis, in these instances, can easily cripple your business for weeks or even months, so facing one even every four to five years could be truly dangerous. Other common supply chain kinks include unavailable materials, changing government regulations, pricing pressures and natural disasters, and these obstacles also become increasingly more difficult to predict and prepare for as your supply chain gets more complex and global.
More on cash flow on IndustryWeek.
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