If your business faces cash flow issues, which action should you avoid?

Increasing inventory is an action that should be avoided when facing cash flow issues. This decision ties up cash that could be better utilized for immediate operational needs or to pay off existing debts. When a business increases its inventory, it often incurs additional costs, such as storage and maintenance, without a guaranteed increase in sales. This can exacerbate cash flow problems, as funds that could be used to manage day-to-day expenses are locked in products that have not yet generated revenue.

On the other hand, strategies like reducing collection times for receivables, delaying accounts payable, and reducing operating expenses are generally more effective in improving cash flow. Collecting receivables faster brings cash into the business sooner, delaying accounts payable allows you to hold onto cash longer without facing penalties, and cutting operating expenses decreases the outflow of cash, all of which can help stabilize and improve cash flow in tight situations.