Running a business is a multi-layered venture. It involves exciting things like creating your services/products, offers, social media content, etc. But it also includes looking after the finances – managing your cash flow. Once that is covered you can enjoy the benefits of cash flow management and easily navigate the day-to-day business ops.
What does Cash Flow Management mean?
It’s essentially tracking the money in your business or rather monitoring cash coming into your business (generated income from sales), as well as cash that is being spent (e.g. salaries, bills, inventory, etc). Cash flow management is what will give you a good insight into revenue versus costs.
Benefits of Cash Flow Management
Managing your cash flow will give you a bird’s eye view of all your business activities. It will enable you to really grasp how your business is doing. And there are so many benefits of cash flow management. So, let’s take a look at how it can help you run your business effectively and support you on your entrepreneurship journey.
1. Make effective predictions for your business
When you’re on top of where every single penny goes in and out of your business, you’re sure you’ve established good cash flow management practices.
The numbers you see every month will indicate your cash flow patterns. And that will allow you to make realistic forecasts (as opposed to forecasting some dreamy numbers that you’d like to entertain yourself with). This will, in turn, mean that there are no big surprises such as:
- large bills
- slow weeks/months
- bigger expenses due to necessary investments
Because you’ll be able to predict them. So, based on your data-backed predictions, you’ll know how to adjust your business operations during such times.
2. Pinpoint problems (and resolve them)
Spotting problems is another benefit you can expect to see from cash flow management. Comparing your projected cash flow statement with the actual one clearly draws attention to where things haven’t gone according to plan. Wherever you notice negative cash flow, you need to investigate why it has happened. Once you have that (undeniably) very important information, you can make decisions about what adjustments to make so as to have a positive cash balance.
3. Expand your business – at the right time
The goal of every business owner is to be able to grow their business over time. Or as a matter of fact, as soon as possible. Good cash flow management will prevent you from making a rushed decision and avoid a downward spiral for your business. In fact, your cash flow statement numbers will give you valuable information based on which you can make a learned decision about when’s the right time to expand as a business. Knowing that you have all the necessary assets to actually take that next step will enable you to operate strategically – with a clear plan and expectations, not to mention peace of mind.
If you’d like help on how to get started with cash flow management, our FREE cash flow guide is a great resource. Or you can sign up for a FREE trial to Numbers Know How and gain access to a Cloud planning tool, tips, techniques and resources.