How Long Can a Business Operate with Negative Cash Flow?

Negative cash flow

The health and stability of any business are often evaluated on the basis of its cash flow. If a business is

bringing in more cash than it is spending, it is said to be cash-flow positive. On the other hand, if it is bleeding

Now, conventional wisdom suggests that a business that’s cash-flow positive is more stable and doing well

financially as compared to the business that’s cash flow negative. In some cases, this might be true but overall,

it’s not that simple. We need to take a much broader look at some of the other factors and variables of the

If you check out the financial records such as balance sheets and profit and loss statements of large

corporations, you’d observe that even they choose to go cash flow negative for some time. Amazon, which is

currently the largest online e-commerce platform, stayed cash flow negative for years. What such businesses

usually do is reinvest their revenues, the cash that they are bringing in, into future growth opportunities such

as building infrastructure, acquiring top talent, streamlining the supply chain, creating a better digital

This means that while they are cash flow negative currently, they are developing a more stable and profit-

oriented business for the future. So yes, it is okay to be cash-flow negative as long as your business is

planning for the future. If that’s not the case, then you need to estimate why your business is cash flow

Determining the cash flow of the business is essential as it helps you come up with a viable cash management

 For instance, if you have $50,000 cash at hand and your monthly expenses are around $10,000, you have five

months of runway. However, estimating cash flow isn’t that simple. In order to get a clearer picture, you also

–        The cash you’re going to bring in the next few months could be in the form of additional revenue, a new

loan, or an investment. These will have a positive impact on your reserves giving your business a chance to

–        Another factor you need to consider is unexpected cash outflows which could include major repairs, tax

bills, loan payments, or major acquisitions. These will have a negative impact on your reserves reducing your

The first and the most obvious way to reduce your negative cash flow is through expense management.

Review all of your expenses and cut down the ones that aren’t absolutely necessary. Even a 10% to 20%

Another factor that can have a major and the most sustainable impact on your cash flow is your sales or

revenues. Make all efforts to sell more of your product or service as it enhances your chances of improving

Another way to manage your negative cash flow is by negotiating the terms of your financing payments that

are going to be due in the near future. If you can extend the deadline of making payments to your vendor or

rescheduling loans. Although these are short-term measures, they can provide you with a lifeline when

One of the best ways to bridge the gap between your cash inflows and outflows is to receive the payment

that’s actually owed to your business. You can cash your receivables through the invoice financing app Lendo

and become cash rich instantly. The primary advantage of this strategy is that it’s not a short-term solution as

you can continue to cash your receivables as long as you’re in business and maintain a healthy and stable cash