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WHAT IS CASHFLOW?

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This is the process of cash moving out of the business (cash outflows), and cash moving into the business (cash inflows).

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The ideal scenario is to be in a ‘positive cashflow position’.– i.e. more cash is coming into the business than is going out.

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When you are in a positive cashflow position, the main benefit is that you will have enough cash available to fund your daily operations, debt repayments and growth.

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On the flip side, if you are in a negative cashflow position, this can be a red flag that the business is facing some financial challenges.

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HOW DOES CASHFLOW AFFECT YOUR BUSINESS?

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We know that things are tough out there for some people and not having enough cash is one of the biggest reasons behind businesses failing, even if they are profitable on paper.

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Five key areas to focus on include:

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Monitoring your cash inflows and outflows – Regularly tracking cash moving in from sales, loans and investments, as well as managing cash moving out to pay for expenses, purchases and debt repayments.

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Managing your account receivables and payables – efficiently managing the timing of your customer receipts and supplier payments helps to deliver stable cashflow that’s easier to predict and keep on top of.

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Getting proactive with your budgeting and forecasting – creating realistic cashflow budgets and forecasts helps you predict your future cash position. By anticipating your future cash needs, you can actively plan for potential shortfalls or surpluses.

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Being in control of your stock/inventory – having excess stock in your warehouse ties up cash. It’s a good idea to optimise your inventory levels and to only manufacture/order the items you need.

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Investing in your cash reserves – by keeping emergency cash reserves in the bank, you have funds to handle unforeseen cashflow issues or sustain your operations during lean periods. This makes your whole cashflow position more stable. Make sure you are running multiple bank accounts, to give you more clarity on your cash reserves.

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Positive cashflow is the beating heart of your business. This reduces stress, makes decision making easier, and allows the business to grow.

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If you have further questions regarding the five key focus areas above or want some assistance at implementing them please contact Marko, Aaran, or one of the Team.

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