Cash Flow Management: Securing Cash for Growing Operational Costs.

How can you ensure there is enough cash on hand to cover the increased operational costs that come with growth?

So, you want to grow the business? Good on you. Almost all business owners in the world share the same aspiration. Yet, not everyone can do it. Why not? In most cases, the failure to achieve and sustain growth – and we mean profitable growth – can be traced to a failure to be well prepared for, or a failure to react to, what happens when your business begins to grow. In this article, we talk about cash flow management.

Cash Flow Management

You probably already know that cash is the lifeblood of your business. How well it flows and when it arrives back into your bank account is important because only then can you spend it. If your obligation to spend it occurs before the cash arrives, then you’re in trouble. That is, unless you realised this could happen and planned ahead by putting in place something like an overdraft facility.

This issue worsens with growth. The size of that hole and the likelihood of it occurring are increased by scale because the size and number of transactions you undertake will grow with you.

That makes good cash flow management important. Staying on top of your invoicing and collections, knowing when and how much cash will leave the business to pay employees, suppliers and financiers and matching those as best you can are all important elements.

Here are some other practical things you can do:

• Build a financial model to help predict the flows of cash in your business;
• Identify where cash is ‘tied up’ in your business (and work to release it);
• Examine inventory ordering habits including re-order points;
• Negotiate favourable payment terms with your suppliers;
• Invoice sooner;
• Negotiate favourable payment terms with your customers;
• Measure and manage your cash-to-cash cycle;
• Give cash management some profile in your business – i.e. talk about it;
• Provide training to your accounts receivable team to help them collect more cash sooner.

We have spoken before about profitable businesses failing because of a lack of cash resources and/or poor cashflow. You can read that article here.

Managing cash flow is crucial for any business. To make sure you’re on the right track for a sustainable growth, it’s a good idea to seek out the advice of an accountant that has business acumen. With the help of the BridgePoint Group team, you keep your business moving forward. Contact us on 1300 656 141 for help to improve your cash flow.

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Neil Parker

MANAGING DIRECTOR

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