There’s an old saying in the business world: turnover is vanity, profit is sanity, but cashflow is king. Your revenue may be an impressive topic of conversation, but it means very little if your outgoings are higher than the amount of money you have coming in.
Ineffective cashflow management is one of the top reasons over 50% of British startups fail within their first five years. It’s therefore pretty darn important to get on top of how money arrives and departs from you business, and make sure you stay on top of it!
At its simplest, cashflow management means ensuring the sum of the money coming into your business is greater than the sum of your outgoings. If you don’t have enough money to pay your staff, rent or suppliers, you will very quickly find yourself in a tricky situation. A sudden cashflow shortage can lead to a destructive cycle of overdrafts and credit fees which can be difficult to recover from – always plan ahead, and always have cash reserves available.
You can avoid a cashflow emergency by always knowing how much cash you have and consulting your cashflow forecasts before you make any large business decisions.
Watch this video to discover the most useful cashflow dos and don’ts for you and your small business.
Image by Al Hikes