Cash Flow: The Unseen Driver of Your Small Business Success

Close up of hands with red nail polish counting hundred dollar bills with a desk, notepad and calculator in the background.

Cash flow might sound like a term tossed around in big corporate boardrooms, but it’s actually a down-to-earth concept that can make or break businesses of all sizes. In essence, cash flow is the money that flows in and out of your business. It’s the difference between the cash you have coming in from sales and the cash you spend on things like supplies, rent, and paying your team. And for small businesses, managing cash flow is often the key to survival and growth.

The Reality of Cash Flow Management

Here’s the thing: nobody really teaches you about managing cash flow. It’s not something that’s covered in high school or even in most college courses, yet it’s fundamental to running a business. Many small business owners learn about cash flow through trial and error—a risky and often painful way to handle the purse strings of a company.

Cash Flow 101 for Small Businesses

Cash flow management means knowing exactly when money will be coming in and going out of your business. It’s about timing. You want to make sure you have enough cash on hand to cover your bills at any given time. Here’s a look at how to keep your cash flow healthy, explained in plain English:

  • Understanding the Basics: Simply put, make sure more money is coming in than going out. This means keeping a close eye on sales, making sure customers pay you on time, not overspending on expenses, and planning for infrequent expenses.
  • Credit Card Savvy: Credit cards can be a useful tool for managing cash flow. They let you pay for something today and send the cash later. But be careful—always have a plan to pay off that balance without touching the cash needed for your day-to-day operations. The goal is to have enough money to be current on your expenses. If you pay your credit card statement balance by the due date, you are paying for things you bought 25-55 days ago, essentially spending next month’s revenue.
  • Setting Aside for Infrequent Expenses: We all have those big and small bills that come around once in a while, like insurance or tax payments. They shouldn’t take you by surprise. Treat them like a monthly expense, setting aside a little each month, so you’re ready when they hit.
  • Stay on Top of What You Have: Use a simple system or software to track your cash—the real money you have, not what you expect to come in. That way, you’ll know what you can spend and what you can’t.
  • Tweak as You Go: Your first cash flow plan won’t be perfect. Depending on your situation each week or month, take a look at what actually happened and adjust your plan for the next month. This way, your cash flow plan gets better and more reliable over time.
  • Save for a Rainy Day: Aim to have a buffer—about three months’ worth of business expenses saved up. It’s your safety net for when things don’t go as planned.

Why Personal Cash Flow Matters Too

Many small business owners run their personal and business finances together, which can get messy. It’s important to keep them separate for a bunch of reasons—taxes, for one, but also to give you a clear picture of how your business is really doing.
Just like with your business, you should manage your personal cash flow with intention. Track what you spend and earn, avoid and/or reduce debt, and get one to three months ahead. Having your personal finances in order means one less stress on your plate—and a healthier overall financial picture. After all, who doesn’t want to spend less time worrying about money?

In an upcoming blog, I’m going to address how managing money is not taught. By and large, we are let down when it comes to financial education, especially household cash flow management. It’s not part of our educational system and our social structures view it as a taboo topic to address with friends and family. Stay tuned!

Cash Flow: The Silent Factor in Business Success

In a nutshell, cash flow management is about planning, monitoring, and adjusting. It’s not the most glamorous part of running a business, but it’s absolutely essential. Without a watchful eye on cash flow, even the most profitable business can find itself in trouble.
Remember, managing cash flow is about making sure you’ve always got enough cash in the bank to keep things running smoothly. It’s a skill that everyone can learn with a bit of practice and patience. Start small, stay consistent, and before you know it, you’ll have the cash flow confidence to guide your household and your business toward a secure financial future.

Getting a handle on your cash flow can really turn things around for your business. Let’s chat about how we can get your finances flowing in the right direction.

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