Cash Flow Management: Critical to Business Growth

By Martin Sargent

Cash Flow is the Lifeline of Your Business

Cash flow is crucial for the survival and success of your business, yet it’s often overlooked. Instead of focusing solely on profit, prioritize cash flow. If your cash flow is strong, profits will naturally follow.

Do you have a solid money management plan that keeps you aware of your cash situation daily or at least weekly? Many businesses fail because they don't have enough cash to keep things running smoothly.

Here’s how you can create an effective cash flow plan:

1. Set Clear Payment Terms with Customers

Make sure every customer knows when their payment is due. Your payment terms should include deadlines and any late fees or penalties for overdue payments.

2. Make It Easy for Customers to Pay You

Simplify the payment process for your customers by offering options like direct bank transfers or credit card payments, including mobile payments if needed. The easier it is for them to pay, the faster you’ll get paid.

3. Send Invoices Promptly

To get paid on time, send invoices as soon as the job is done. Don’t wait until the end of the month. You can also consider shorter payment deadlines, like "due in 7 days," instead of the more traditional "due by the 20th of next month."

4. Prioritize Cash Flow Over Profit

Remember, profit and cash flow are different. Profit is not necessarily money you can spend right away, while cash flow shows you what’s available to use immediately or in the near future.

5. Use Technology to Track Cash Flow

Set up a cash flow management system on your computer so you can easily keep an eye on your finances. Poor cash flow equals a struggling business.

Don’t underestimate how important it is to monitor your cash flow daily, weekly, and monthly. If you’re not sure where to start or need help, reach out to us—we’ll get you on the right track toward better financial health.