Cash flow is the heartbeat of any business. It’s not just about profits on paper; it’s about the money in your bank, today and tomorrow. Managing it well gives you control and lets you sleep at night. But managing it poorly? That’s a fast track to stress and missed opportunities. On this post, I want to share my approach to understanding and actively managing cash flow to keep your business healthy.
Why Your Cash Flow Needs Your Attention
You can be profitable on paper and still run out of money. It’s a reality that brings down many businesses. Active cash flow management means tracking the movement of money in and out of your business, which gives you the foresight to make smart decisions. It’s what keeps the lights on, pays salaries, and lets you plan for the future with confidence.
Beyond the Basics: What AR and AP Don't Show You
Most people start with Accounts Receivable (AR) and Accounts Payable (AP) data. While these are essential, they only tell a part of the story. To get a real view of your cash flow, you need to look at the full picture.
Here’s what often gets missed:
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Payroll: Salary runs, commissions, and bonuses.
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Taxes: All of them—salary-related, VAT, income, and corporate taxes.
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Debt: Loan repayments and interest.
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One-offs: Planned large expenses or investments (CAPEX).
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Owner Distributions: Dividends or cash reserves.
My Approach to Building a Cash Flow Radar
So, how do you get all this data in one place and turn it into a useful tool?
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Start with the Truth: Use your actual bank account data—real-time balances and transactions are your most accurate source. Then add all know agreements which haven’t yet shown up on your bank account.
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Build a Prediction: Create a rolling forecast for the next 3–6 months. This isn’t about guessing; it’s about calculating. It acts as your early-warning radar for potential issues.
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Automate What You Can: Manually tracking all this can be a nightmare. This is a perfect example of where Business & Financial Process Automation comes in. By linking your accounting, payroll, and banking data, you can build an automated dashboard that gives you real-time visibility without the manual work.
When Your Radar Shows a Negative Outlook
If your forecast shows you’re heading toward negative cash flow, don’t panic—but don’t wait either. Early action is key.
Some options to consider:
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Speed up receivables: Offer a small discount for early payments or tighten your terms.
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Optimize inventory: Reduce stock to free up tied-up cash.
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Cut back: Negotiate better terms with vendors, defer non-essential payments, or reduce expenses.
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Raise short-term funds: Explore a line of credit or a short-term loan.
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Get strategic: Use analytics to identify which clients or products are most profitable, allowing you to prioritize your focus.
Remember, the key is to make informed decisions early.
Let's Look at Your Business's Heartbeat
Cash flow is like the oxygen of your business. You don’t always notice it when things are going well, but when it gets tight, you feel it fast.
If you’re ready to move beyond manual spreadsheets and build a reliable system to manage your cash flow, I’m here to help. Let’s have a chat about your business’s needs.