Staying cash flow positive

The amount of cash flowing in and out of your business, known as cash flow, is one of the best indicators of the short and long term success of your business. Whilst your business can look profitable at first glance, it may not have the cash coming in to allow you to continue trading successfully. By monitoring your cash flow, you’ll: 

• Allow your business to be flexible
• Improve internal operations
• Attract more investors to your company

In this article, we’ll outline how you can stay in control of your cash flow in 3 simple steps.

Table of contents

• Create a cash flow forecast
• Create a cash flow statement
• Implement cash flow management

Create a cash flow forecast

By knowing how much money is expected to flow in and out of your business, you’ll have the information you need to plan for financial ups and downs in the months ahead. 

A cash flow forecast is typically split into two categories. The first is cash inflows, which covers money you’re expecting to come in from activities such as sales and investments. Cash outflows is the second category, covering money projected to leave your business, such as employee wages, operating expenses and loan payments.

A cash flow forecast allows you to:

• See which areas of your business you should invest in or need to cut back on
• Make sure you know when you’ll have the cash to pay your suppliers
• Gather some of the required information you need to apply for funding from the government, banks and/or shareholders
• Collect historical data so you can see what worked well in the past and what didn’t

With this information, you’ll be in a better position to make well-informed decisions for the future of your business.

Create a cash flow statement

Whilst a cash flow forecast gives you an insight into the future of your business, a cash flow statement is a real-time health check. It’s a financial document that shows trends in your business performance that you might not spot on your income statement or balance sheet.

A cash flow statement divides your activity into three categories: operating activities that generate revenue, investing activities where you buy or sell long-term assets, and financing activities that change the equity or borrowings of your business, such as selling company shares. 

This information shows you where your business has incurred expenses or collected cash, which you can use to make cash goals for the end of the next month, quarter or year. With realistic goals in place, you’ll be encouraged to keep your operating expenses under control and achieve the targets that you know you can!

Implement cash flow management

Once you’ve created your cash flow forecast and statement, it’s time to put clear techniques in place to establish a positive cash flow. This includes sending invoices as soon as you’ve completed a job, keeping a cash fund for unexpected emergencies and offering your customers a discount if they pay early.

Find cash flow forecast and statement templates, expert tips from UK accountants and a more detailed look into how to increase your cash flow by downloading Tide’s free ebook ‘Cash flow positive: A complete guide’.