Improving Cash Flows

Improving cash flows:

What are cash flows?

Cash flows are one of the most important tools for any business and when used effectively can make the difference between success and failure. Cash flows are used to determine how much cash is expected to come in and out of your business from one period to the next. Taking in more cash than you spend out gives you a positive cash flow whilst spending more will give you a negative flow.

Why is it so important?

Having cash on hand is critical to all businesses, however, cash flows are distinct from this and should show you the flow of cash into your business and how this is used. Knowing what your cash flow position looks like means that you can plan for the future.

It can highlight those periods when perhaps sales are slow or a particularly large expense is forecast so that you can consider how to best deal with the decrease in cash flow. This might mean having to look at borrowing money or increasing your overdraft. The cash flow forecast helps to ensure that these debts can be repaid in the future.

They can also help to identify periods where cash flow is expected to be good so that you can invest in the growth of your business. You might consider buying that new asset to help improve efficiencies or invest in more staff. Maybe you could pay an additional staff bonus or dividend.

Ultimately, the cash could be used for anything but without knowing your future cash flow position how can you make these decisions without potentially exposing yourself to problems later on.

Understanding your cash flow therefore helps you to make strategic decisions within your business rather than continually being on the back foot. It enables you to make decisions with confidence and provides flexibility to deal with any challenges your business may face.

How can we help?

Whether you’re looking to build your cash flow forecast from scratch or are concerned that you’re not using your existing forecast to its full effect, we can help you to create a cash flow which will enable you to make decisions based on key aspects of your business, not just guess work! It is unlikely that any cash flow will be perfect and there will always be room to continually improve but having no cash flow at all could lead to disaster.

Call us now on 01892 507288 for more information and advice.