How good cash flow management can help your business

For a business, whether it is a start-up or an established business, cash acts as a lifeline; it is the one aspect that allows a company to survive. The amount of cash a company has on hand often reflects a company’s health. A business, especially a start-up business, might survive for a while with no sales or profit, but without cash it will fail.

In order to give your business the best possible opportunity, you need to have sufficient control over the cash flow going in and out of your business. Of course, you want more money to flow into your business than out of your business, but to make sure that’s the case, you need to have a good understanding of your business’ cash flow. You need to have a good idea of ​​your cash flow if you’re thinking about expanding or if you want to borrow extra money. To support this estimate of your cash flow, it’s a good idea to keep your receipts, as they show examples of some of your expenses.

An important aspect to remember is that there is a difference between cash and profit. For a business to make a profit, it must produce and deliver goods or services to customers before you actually make a profit. So if you don’t have the money, you technically don’t have a business to run. If you want more proof of this, just look at the facts; The reason most businesses fail is because of poor cash management that has resulted in a business not being able to afford to continue, and poor cash flow is why the majority of start-up businesses fail not survive their first year.

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Some examples of the cash flow that will accrue to your business are:

o Payment for goods/services from your customers
o Bank loans that you may have taken out
o The interest you receive on savings and investments
o An increased overdraft or credit

Some examples of the money that will come out of your business are the following:

o The purchase of supplies, raw materials or tools that your business needs
o Your staff wages, real estate rents and all your day-to-day running costs
o Any loan repayments your business may have
o Any dividend payments
o Income tax, corporation tax, VAT and other taxes
o Reduced overdraft opportunities

In order to have good cash flow in your business, you need to make sure that your income pattern and business spending habits allow you to have cash on hand and be able to pay the bills on time. Cash flow depends on the timing and amounts of money going in and out of the business each week and month.

To help you with your cash flow management, it’s a good idea to keep all of your cash on hand so you can see exactly what’s going in and out of your business. This allows you to find ways to potentially improve your company’s cash flow.

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