Why is cash flow management important?
We probably don't need to explain that money makes the entrepreneurial world go ‘round. Without available cash to cover your running costs and overheads, your business is dead in the water. Money flowing in and out is called your cash flow, and it is vitally important that you track and analyze this, in order to make smart financial decisions that make your money work for you.
A cash flow analysis allows you to analyze the liquidity position of the company and gives a snapshot of the amount of cash coming into the business (inflows) and amount flowing out (outflows). Smaller businesses are often very dependent on their monthly inflow in order to cover running costs and overhead, meaning that positive cash flow and proper cash flow management is vital. Let’s dive in.
What are the 3 types of cash flows?
There are three basic sources of revenue that can flow into your business.
How Can You Increase Cash Flow?
There are a number of short-term and effective strategies that you can implement in order to immediately improve your cash flow. Consider the following:
Now that you've increased the cash flow and kept yourself liquid, it's just as important to manage that liquidity to your advantage. If you do not have the experience or the in-house expertise on tap, consider getting the experts on call, like OCFO, to advise you on your cash flow management.
Getting in the OCFO Experts to help you manage your cash flow smartly
Growth sucks cash – that’s the number one law of entrepreneurial gravity. As you grow, there will be a bigger and bigger ask of your available resources, while managing everything becomes ever more complex. As an entrepreneur, your job is to focus on growing the company, while a dedicated Outsourced CFO gives you the clarity to make the right calls as you power towards the next milestones. For instance, periods of high profitability and liquidity events (fundraises, exits) can lead to excess money in the bank. Make smart cash allocations and manage your cash flow with ease, led by the insight and experience of a CFO who has handled large sums before.
All business owners will want to avoid cash flow problems. However, due to their size and ability to access financial resources, SMEs are often disproportionately affected by negative cash flow. Careful management of cash flows and attention to liquidity will see your business through any crisis. Contact OCFO, we have the experts and the tools to help you analyze your cash flow situation, and plan for future liquidity.