Cash flow is the heartbeat of every successful business. Without it, even profitable ventures can find themselves struggling to stay afloat. Today, we’re diving into cash flow essentials and strategies, particularly for medium-sized businesses with turnover between $2-10 million.
Why Cash Flow Matters More Than Revenue
Cash flow isn’t just about revenue; it’s the movement of money in and out of your business. A solid cash flow means your business can meet its short-term and long-term obligations. On the flip side, cash flow issues can lead to insolvency, where businesses can’t meet their debts—ultimately threatening their survival.
Cash vs. Revenue: Know the Difference
While revenue is the income generated by sales, cash flow includes all cash movements, including expenses. Medium-sized businesses often face cash flow hurdles due to project-based revenue, which may come in delayed payments. This can lead to a cash bottleneck if not properly managed.
Practical Solutions to Boost Cash Flow
For a steady cash flow, try these foundational steps:
- Cash Flow Forecasting: Project your income and expenses, ensuring you have the funds to keep operating.
- Implement Profit First: Set up separate bank accounts to manage different cash flow purposes, like tax and payroll.
- Due Diligence: Before big projects, conduct credit checks to ensure clients can pay on time.
Regular Reviews and Expense Cuts
Every three months, review and cut unnecessary expenses. Look for subscriptions or services you may no longer use, or negotiate better rates with suppliers.
With these steps, you’re on the path to better cash flow management, securing your business’s future. Keep cash flowing, plan for the unexpected, and enjoy the peace of mind that comes with financial control.