Cash Flow Management


A wise business owner once said, “Happiness is a positive cash flow.” As a business owner, I’m sure you agree. Everything is better when your cash-in exceeds your cash-out.

A cash crisis can be emotionally devastating and it can even kill your business. If you’ve ever had to beg, borrow and steal to cover tomorrows payroll you know what I mean.

Why Is This Cash Flow So Important?

Cash Flow ManagementAlthough cash inflow comes basically from your customers’ payments, interests on investments, loans or money received from an investor, it is the lifeblood of any business. This cash will go a long way in helping you settle employees, pay rents, buy raw materials or equipment, etc. that is why positive cash flow is important.

Positive cash flow means your business is running in the black and when it becomes high enough, you can easily open a branch and hire more workers – generally growing the business.

However, there is another phenomenon – the negative cash flow. It is when the money paid out at different times exceed the money that comes in. this is where ‘cash crisis’ comes in and if you have ever had to cut corners or beg or borrow just to fix an impending payroll, then you’re not a novice to what a negative cash flow can do.

To achieve and maintain positive cash flow, you need to get serious with ORGANISATION and PLANNING.

There are a few necessary steps you need to take to kick start your cash flow management.

Firstly, you need to itemize all your start-up expenses (both made and expected). Some of these expenses may include licenses and permits, rental or property purchase, incorporation fees, legal and accounting expenses, renovation/remodeling or construction fees, marketing materials, inventory of initial supplies, equipment, office furniture and supplies, and cash register.

Secondly, you may want to determine the amount of cash that your company expects at the end of a certain period. Such cash might come via investments, sales, loans, etc. those acquiring an already existing business stand a better position as the company’s sales history can help get a clear definition of what to expect in the future and hence what changes that can be made.

Lastly, your company’s monthly expense management must be sorted. Company expenses may include mortgage, insurance, travel, and advertising, web hosting, inventory, payroll, utilities, working capital, loan payments, and taxes. And we almost forgot you would need to pay yourself!

To make headway with these processes, you will need to be objective and honest. Getting accurate cost estimations and being realistic about your sales capacity is the key. When you know your cash inflow capacity, simply reducing your expenditures is a good way of maintaining the positive cash flow.

Imagine you’re about launching a boutique and you have two spaces to rent. One is an airy 1000sq.ft and the other is a 500sq.ft. It might be a wise choice going for the latter. It will definitely speak volumes in your cash flow.

Professional assistance is paramount to achieve and maintain positive cash flow. There are daunting tricks involved in cash flow management and that is where SMARTCPA comes in.

We have dedicated staff offering cash flow management services to both already existing and new businesses. We are aware of the implications of negative and positive cash flow and we have set out to make your business progress against all odds.

Our cash flow management service allows you to…

  • know when, where, and how your cash needs will occur.
  • know what the best sources are for meeting your additional cash needs.
  • be prepared to meet these needs when they occur, by keeping good relationships with bankers and other creditors.

The starting point for avoiding a cash crisis is allowing us to develop a cash flow projection for you. We can help you develop both short-term (weekly, monthly) cash flow projections to help you manage daily cash, and long-term (annual, 3-5 year) cash flow projections to help you develop the necessary capital strategy to meet your business needs.

We also prepare historical cash flow statements to help you gain an understanding about where all the money went.

Creating an accurate cash flow projection is just one of the many cash management services we provide. You also get…

cash flow projection

  • Help obtaining an appropriate line of credit
  • Cash collection acceleration techniques
  • Proven effective collection policies
  • Proven effective payment policies
  • Help obtaining the maximum rate of return on your idle cash

P.S. – If your customers buy your product or services on credit and have a liberal time frame for paying back, this will pose a serious threat to your effective PLANNING.

How you can encourage your debtors to pay up on time.

  • Issue invoices on time and do prompt follow-ups as well.
  • Encourage early payment with a promise of a discount for it. For example, if a debtor is supposed to pay within a month, promise them a discount for paying within 2 weeks.
  • Endeavor to have an upfront payment structure for a short term project and interval payments in case of a long term project. This will mean that you will be having some cash income throughout the period.

Also, endeavor you pay your bills on time to avoid creating a bad impression with your creditors or investors. Although paying bills involve an outflow of cash, we can show you smart ways of making it ‘less hurtful’ to your business like;

  • Fully utilizing the payment term
  • Learn about flexible payments in dealing with specific vendors. It might not be spelled on the wall but you can find out if you ask.
  • Setting up ETF payments whereby you only pay when it is due and not before.
  • Building a healthy relationship between you and your suppliers as this may lead to several flexibilities in terms.

Life can be much easier with SmartCPA cash flow management services.