How to Manage Your Company Cash Flow

One of the biggest challenges a company faces is the effective management of their operating cash flow.
Whether you are a small business or large corporation, proper cash flow management can be the make or break of any business.

What is cash flow?

Cash flow is money moving in and out of a company.  Incoming cash refers to revenue or external funding and outgoing cash are your expenses, such as stock purchases and wages.

Knowing what is coming in and going out of your business enables you to:

  • Assess financial health
  • Make informed decisions regarding spending
  • Plan for the future

Tips for managing cash flow

Staying on top of your bookkeeping is a must!

There are several tools available for managing cash flow through accurate bookkeeping, with most now being digital and a large number being online.

The emergence of solutions such as QuickBooks, XERO and Sage have made it easier to keep on top of this task, providing you use the software consistently.

It is relatively straightforward to generate cash flow statements using accounting software, and these statements will give you a clear picture of your status.

If you are not confident with carrying out your own bookkeeping and accounting, then it may be better for you to hire a professional.

Keep on top of invoices

Invoicing your customers on time and chasing unpaid invoices can be time consuming and a chore. But without keeping on top of this task your cash flow will suffer.

As much as a third of payments to small businesses are commonly late, which can have a massive effect on your business. Many companies look to invoice finance when late payments become troublesome.

Build up a cash reserve

Having money in the pot is very important. It can help with covering unpaid invoices, allow you to buy additional stock that may be on offer or cover unexpected expenses.

Having cash to fall back on helps keep you in business during lean or difficult times. For businesses with little or no cash reserves, using working capital finance can be a good option. There are many options for cash flow finance with traditional banks and alternative lenders offering these business loan products.

Put cash flow before profit

Profit is important for any business, but all businesses need consistent cash flow to survive. Cash is King.  Holding out for large profits that do not come often enough, without adequate cash in the business will often result in business failure.

Many businesses will reduce prices on surplus or under performing stock to increase income.

Knowing your price point and breakeven point will allow you to use adaptive pricing to ensure cash keep flowing into your business without operating at a loss.

Keep personal and business finance separate

Some business owners use the same bank account for personal and business use, this can be problematic.  When it comes to proper cash flow management and accounts, you need to know exactly what cash and payments are personal or business related.

It is a good idea to have separate accounts to make the separation of business and personal cash simple.

Whatever your business size, effective cash flow management is key.  For a business to be financially stable and a success, you need to know exactly how much cash is coming in and going out at all times.

If you are struggling to keep track of your cash flow, then speak with your accountant or a professional.  If you are struggling for free cash, you can apply for cash flow finance.  If your business is making a loss, increase sales through marketing or look to diversify.

Whilst RLA Capital cannot offer financial advice, we can provide various financial products to assist with cash flow.  RLA Capital would recommend speaking with your accountant if you are experiencing cash flow problems.


Updated: Nov 23, 2021