Business Point

Cash flow is the movement of money into and out of your business that determines your business' solvency. Budgeting for future cash flow will help you to understand whether you will have enough funds in the business to pay creditors.

Cash is the lifeblood of a small business. A business can sustain itself for a short time without sales or profits, but without cash it will die.

Cashflow is essential in ensuring a business survives and prospers, and is the primary indicator of business health. For this reason the inflow and outflow of cash need careful monitoring and management.

Understanding and practising the key elements of cash flow and cash flow management will help protect the financial security of your business.

There are steps you can take when dealing with your customers, suppliers and stakeholders to improve cash flow and avoid common problems:

• Know your income and expenditure, and tax and employee financial obligations
• Research asset purchases extensively and plan for major purchases
• Use the practice of forecasting to anticipate and plan for highs and lows in your business' lifecycle, and keep that budget up-to-date
• Identify cash flow problems before they build up by closely monitoring the payment habits of customers and your own supply management
• Work on good relationships with your banker, accountant, and customers
• Improve your operating systems for improved production efficiencies and controlled financial systems

Working on improving your cashflow is worth the investment of your focus, time and resources. Get advice from your financial advisors, and follow through on tried and trusted methods of financial control that will support your needs throughout your business lifecycle.

For more information see the Cash Flow Management business guide.