What is cash flow and why do you need it?

Cash flow is one of the most important things to monitor in your business. Without cash, you don’t have a business - and a lack of cash is one of the biggest reasons why businesses fail.

If you want your business to be successful, it pays to know what is happening financially within it!

Cash flow - the flow of money in your business

Simply put, that is what cash flow is. It’s the money in and money out of your business. That flow of money is the lifeblood of your business. You want a healthy flow of money because, if you have too much money leaving your business or not enough coming in, your business is in trouble.

And if you don’t know what’s happening with your cash flow, you can’t hope to know if your business is profitable or not either.

Why cash flow is important

Knowing and tracking your cash flow is more important in uncertain times. You need to know how long your money would last if you were ill or something happened and you lost key clients overnight (COVID-19 anyone?!).

Do you have 3 months of money in the business if something happened? Could you afford to keep going, whilst you chased late payments or had to start from scratch again?

When you know your figures, you can create a cash flow forecast. This will help you decide whether you can afford to invest in your business and is critical for getting investment in your business.

Keep track of the cash flow in your business

Tracking your cash flow doesn’t have to be difficult. You can do it in a spreadsheet if you have a simple business, if you’re disciplined at tracking and recording transactions within your business. However, you may find it easier and more streamlined, if you opt for a less manual-heavy method of tracking. 

This is often one of the main reasons why many businesses prefer to Invest in a good accounting system. It helps you to accurately track your cash flow and record the movement of cash within your business, automatically. Depending on the type of system you opt for, many can often help you to predict what is going out and what is coming in.

Cash flow is one of the most important things to monitor in your business. Without it, you have no idea of how profitable your business is and whether your business is even healthy. This is why so many businesses fail in the early stages - they simply don’t pay attention to the flow of money within their business.

It is so easy to get all tangled up with cash flow, but there are ways you can get clear on how to effectively manage yours. If you need a little expert guidance or help getting generally unstuck or understanding more about cash flow, my power hour call is the solution! You can get expert help or guidance on anything related to pricing or making more profit in your business, by booking in a power hour call with me. Let’s get you the answers and forward traction you need, to make your business a successful one!