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Managing the cash flow impacts your business and if done well, can even lead your business to great heights. New businesses usually do not have that extra money to face any crisis or shortfalls. The first few years are highly crucial for any business. Because this is the time when the business owners need to focus on their cash flow management.

What exactly is Cash Flow Management?

Understanding cash flow management is very important from your business point of view. Cash flow is considered as the amount of money coming in and going out of your business. If the money coming in is more than the money going out then it is called positive cash flow and if there is less money coming in than the money going out, then it is known as negative cash flow.

To calculate this cash flow, business owners are required to note and consider the amount of cash available at the beginning and at the end of a particular time period- this can be a week or a month.

There will be a positive cash flow for the business. If at the end of that period, there is more money in the account as compared to beginning one The business will have a negative cash flow. If there is less cash at the end with respect to the starting of the period. So, having excellent cash flow management is important for your business to earn more profits.

How Can You Manage Cash Flow For Your Business?

It becomes very important to manage your cash flow in times of crisis. There are many tools for doing this. Google Spreadsheets is one of the best tools to create a cash flow statement. It is an outline of where your cash is going. This is a manual process, but is not very long and is easy to track.

Also, It can be easily customized and adapted to your specific needs or situation. The cash flow spreadsheet is an excellent way to visualize your cash flow management and adjust your techniques accordingly.

It will easily show from where and when your cash will be coming in, and when it is going out. This makes it easy to manage your business finances.

Using a cash flow statement can help you take control of your business money. This shows the amount of cash flowing into and out of a business over an accounting period, which can be a week, month, quarter, or year.

 Here are some of the necessary steps that can help to manage your cash flow:

Step 1: Calculating Your Expenses

The first and foremost step is to take note of your financial obligations. You can start by calculating all your expenses and making a list of everything to pay for. This includes your salary, rent expenses, medical costs, fees, loan repayments, etc. Note them down with their due dates.  This will help you remember each and every detail of your financial expenses.

Step 2: Calculate Your Revenue

The next step and focus should be on your weekly revenue. Every big or small business faces fluctuations in sales. This needs to be recorded as accurately as possible.

You can start by noting down any guaranteed revenue that includes any subscriptions or long-term contracts.  This will give you an idea of what’s coming up next and you can easily estimate if those numbers are increasing, staying the same, or decreasing. It is quite difficult to estimate this with a first-time customer but can help you in the long run.

Also,  considering your past or historic data can help you in making the latest decisions.  You need to keep track of any dips in your business sales at the time of the holiday season and more importantly, on all the big and important deals that positively impact your revenue.

Step 3: Fill in Your Data in Projection Spreadsheet

Fill in your business data in the projection spreadsheet to create your business cash flow management. This will include the entries from all the sources of revenue. As they come from multiple channels- web,  retail, and trade.

Similarly, fill in all the entries for your major as well as miscellaneous expenses. Because your revenue and expenses must be taken into account on a weekly or monthly basis to manage them properly.

Step 4- Updating Your Projection Sheet 

A good cash flow spreadsheet should be maintained as a Google Sheet so that it is easily available anytime and anywhere and easily shared with anyone if required. It should be updated to date with all your revenue, expenses, and your closing bank balance. You also need to update the unexpected expenses that pop up sometimes and can also have a major impact on your finances.  By doing this you will actually get to know where something went wrong and how you can manage the overall finances. 

Why Is Managing Your Cash Flow Important For Your Business?

  1. With a good cash flow management system, you can easily anticipate any kind of financial problem or crisis before time. This gives you enough time to make plans and strategies accordingly for your business.
  2. For business owners, managing the cash flow will reduce their stress and anxiety that comes at the time of paying the expenses that come around unexpectedly.
  3. With proper cash flow management, you exactly have proper information about where your money is going, where it is coming from, and where you need to spend more on its growth and establishments.
  4. Managing your cash flow can help you know beforehand what exactly is happening in your overall business and so that you can deal with it easily with an effective plan.

Management of your business cash flow is highly essential. If you want to handle your finances well and get a well-established business. Its main objective is to track and analyze the amount of cash received minus all the business expenses. Even, this will give you an idea of how you will maintain your business during emergencies and spend money in the future.

Salman Rundhawa
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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