Cash Flow: Keep your business healthy through better cash management

cash flow


Cash is king! Cash is the lifeline of any businesses without it the business will fail. Given that most businesses which startup actually fail predominantly due to the shortage of cash, this becomes an essential topic for business people to master.  

All professionals that have a role to maintain a healthy financial position of their companies including: business managers, entrepreneurs, finance managers and product managers should learn how to better manage their cash flow and maintain a healthy business.

Tips for Getting Paid Quickly 

Cash in hand is essential for running of a business, so the more you are able to get paid quickly the more you can have your cash working for you. Explore how to get paid quickly

Steps for Managing your Cash Flow

Cash flow is the flow of money in and out of your company. Cash is what keeps your business alive and knowing if you will be able to pay your bills and handle seasonal fluctuations through a cash flow statement is one of your most important tools.  

Here are 5 Steps for Managing Your Cash Flow: 

  1. Categories’ Your Expenditures based on your businesses’ periodical payments 
  2. Track your Expenditures by ensuring that you capture each payment and documenting it during the period it occurs. 
  3. Get Paid Quickly by invoicing as soon as possible, require down payments, send invoices by email or courier, offer discount for early payments, accept credit card payments 
  4. Hold on to Your Cash as long as possible by requesting longer payment terms, paying as late as you can, paying by credit card to get an extended grace period 
  5. Monitor Regularly by using short-term and long-term forecasting to help you identify any possible shortages before they happen  

The saying says: Cash is King, so treat your cash like one.  

Ways in which Business Cards offer better advantages than checks 

As more and more financial transactions in business are migrating from traditional use of checks to the modern use of business cards, Small and Medium businesses are finding much more convenience and efficiency.  

Here are advantages of using cards instead of checks in your business: 

  1. Improved payment flexibility with also financing option 
  2. Rewards for business spending 
  3. Online reporting to reduce record-keeping time 
  4. Special business discounts 
  5. Ability to pay online  

Businesses can make use of these advantages and be able to pass them on to the employees of the business for added convenience. It is easy and secure to provide business cards to your key team members, whereas providing them with check books might not be the wisest thing to do 🙂  

Reasons why you should prepare a Cash Flow Projections 

Cash budget is an important tool in the hands of financial management for the planning and control of the working capital to ensure the solvency of the firm, and thus, ensure that you have enough cash on hand. A business should have at least 90 days of cash on hand to ensure they remain healthy financially 

Here are 7 Reasons why you should prepare a Cash Flow Projections: 

  1. It is Helpful in Planning. Cash budget helps planning for the most efficient use of cash when there is a oversupply and what to do when it is low  
  2. Forecasting the Future needs. Cash budget forecasts the future needs of funds, its time and the amount well in advance.  
  3. Maintenance of sufficient cash Balance. Cash is the basis of liquidity of the enterprise and a Cash budget helps in maintaining the liquidity. 
  4. Controlling Cash Expenditure. Cash budget acts as a controlling device of various departments expenses  
  5. Evaluation of Performance. Cash budget acts as a standard for evaluating the financial performance.  
  6. Testing the Influence of proposed Expansion Programme. Cash budget forecasts the inflows from a proposed expansion or investment programme and testify its impact on cash position. 
  7. Basis of finance Co-ordination. Cash budget helps in coordinating the various finance functions, such as sales, credit, investment, working capital etc.  

Essential Sections of a cash flow statement 

Cash is king as the saying goes, so documenting cash inflows and outflows in the form of a cash flow statement is essential in any business. No matter how well the business is doing, if cash in the company isn’t managed well, it could go bankrupt.  

Here are 3 sections that should be included in a cash flow statement: 

  1. Operating Activities covers all cash inflows or outflows related to the running of the business including sales, interest revenue, dividend revenue representing cash in and stock purchases, payroll, Taxes, rent, utilities etc.. 
  2. Investing Activities covers all transactions involving the purchase or sale of assets, securities, mergers and acquisitions, in essence items that are not directly linked to the day to day operation of your business 
  3. Financing Activities include flow of cash to and from investors –equity financing or creditors –debt financing 

So as a summary Operating, Investing and Financing activities should be clearly present in the cash flow statement that a finance manager prepares on at least a monthly basis.   

Good management manages cash well! 

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