Cash Flow

How to survive the ups and downs of business cash flow

If you sometimes struggle to cover payroll or avoid paying your tax bill, if an unexpected invoice causes your stress levels to rise, or if you find yourself turning to personal finance sources (credit card or mortgage redraw) to prop up your business – you may need to take a look at your cash flow.

Cash flow is what keeps a small business moving. A healthy cash flow can be the key to success – and an unhealthy cash flow is one of the main causes of stress for business owners. Yet it’s normal for businesses to face cash flow bumps from time to time, often as part of an annual or seasonal cycle. So what can you do?

STEP 1: Get a better view of your cash flow situation

Cash flow management is a skill, one that requires discipline. And although cash flow is not always predictable, the more you understand your business’ cash flow the better prepared you’ll be to weather any cash flow crunches that come along.

The first step is to make sure you do a regular cash flow forecast. Using a cash flow statement helps you understand and manage where your money is coming from and where it’s going. It will help you identify potential problems and plan for them.

Cash flow forecasting tips

A good cash flow forecast allows you to make informed decisions about the future of your business. Things like hiring staff, purchasing inventory or investing in business expansion. Preparing a cash flow statement can be daunting – so why not make a start with our free cash flow forecast template.

Your cash flow forecast should include:

    • Your opening bank balance
    • The cash that is coming in
    • The cash that is going out
    • Your closing bank balance
    • Any surpluses or shortfalls

STEP 2: Ways to support your business cash flow

Even with a robust cash flow forecast in place, there are things you can do to help improve the working capital available to your business. Good news is, these actions aren’t complicated – yet there’s a chance you could overlook them. Take time to read the list on the right and then you might like to check out our 9 crucial steps to cash flow success.

When times are good, put cash aside

  • Analyse expenses and identify savings
  • Review your banking and save money
  • Increase what you charge
  • Review and reduce stock levels
  • Make sure you get paid on time
  • Talk to suppliers about terms

FREE cash flow forecast template

Here’s a ready-made spreadsheet to help you stay on top of your cash inflows and cash outflows, and find out where your finances might need a boost. Our Cash Flow Forecast Calculator provides a quick and easy solution to your forecasting needs, and it’s a great place to start.

  • Quick and easy cash flow forecasting for immediate results.
  • Select from multiple payment types in drop-down menus.
  • Set up coloured alerts for when cash balances fall below a minimum threshold.
  • Get monthly insights on your incomings and outgoings with as much detail as you want.
  • Combine the results into a ‘living’ business plan that changes as you grow.

Download template


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Frequently asked questions

Cash flow is one of the most important parts of a business. When a business has a healthy cash flow it is ultimately in a more stable condition than one that doesn’t. With a healthy cash flow, the business owner can focus budget on short- and long-term business goals without worrying about having enough funds to cover day to day expenses like wages, stock, lease payments and utility bills. Cash flow often tops the list of challenges of running a business – and many business failures are attributed to poor cash flow.

A cash flow statement provides details about where the money in your business comes from and where it goes. It looks at every aspect of your business financials and accounts for all payments and receipts – which means it’s a very valuable tool for many reasons. A cash flow statement helps with both short-term and long-term planning. It helps you determine where you can make savings or find and allocate budget to opportunities for business growth and increasing profit. It is a great tool for managing working capital.

Cash flow is the difference between a business’s opening balance and closing balance at the start and end of a period. It’s a measure of available cash for working capital – and works hand in hand with accounts receivable and accounts payable. Net cash flow can be influenced by many factors, including increasing the sales of goods and services, the sale of an asset, reductions in business costs, price increases, or when customers pay their bills faster or slower.

An interesting thing to note is that a positive cash flow doesn’t necessarily point to a profitable business, nor does a profitable business necessarily have a healthy cash flow. These things operate independently – and are both valuable to the overall financial management of the business.

Cash flow is calculated under three different classifications. The first and most obvious is operating cash flow which consists of the earnings and expenses associated with the main business activities – like sales of goods or services, purchasing of stock, payment of wages etc. The second is cash flow related to investing activities which covers all income and expenditure to do with business assets and investments (and their liquidity). The final is financing activities, which covers the expenses relating to the liabilities of a business.

Calculating cash flow can be as simple or complex as you like. On the most basic level it is simply a cash flow ratio showing the difference between incomings and outgoings at any given time. If the money going out is less than the money coming in, the business has a positive cash flow. Detailed financial reports take into consideration many other factors including depreciation.

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