Which strategy is effective for managing cash flow in a trade business?

Managing cash flow effectively is crucial for the sustainability and growth of a trade business, and proactive expense management is a strategy that addresses this directly. This approach involves continuously monitoring, evaluating, and controlling expenses to ensure that the business operates within its financial means. By keeping a close watch on costs, a business can identify unnecessary expenditures, cut down on wasteful spending, and allocate resources more strategically, thereby freeing up cash for essential operations or investments.

Proactive expense management helps in forecasting future cash needs and enables prompt adjustments to ensure that the business can cover ongoing expenses, especially during fluctuating revenue periods. This strategy not only aids in maintaining a healthy cash flow but also supports better financial decision-making and planning for the future.

In contrast, delaying invoicing can lead to cash flow issues since it postpones the receipt of payments. Reducing the workforce may cut costs in the short term but can also compromise the business's capability to deliver services effectively. Similarly, increasing prices without adequate market research could alienate customers and ignore market conditions, potentially harming revenue streams rather than enhancing cash flow.