You started the year with a sufficient cash balance, and you’ve been profitable each month. But for some reason, the year-end cash balance is lower than where you started. How can that be?
Accounts receivable and inventory can tie up a large amount of cash, and the receivable problem may be easier to fix than your inventory issue.
To reduce your receivable balance and collect cash, you can improve your collections efforts and invoice customers faster. If you have too much cash tied up in inventory, the problem is more complex.
Inventory management is a balancing act for every small business.