Running a business without monitoring your cash flow is like running head-first into the dark.
A proactive approach to cash flow helps remove the stress and uncertainty of running a business, so you can make decisions with confidence and clarity.
Here are 5 reasons why you need a cash flow strategy.
Understand business profitability
Having a cash flow strategy provides clarity on how cash is moving in and out of the business. This gives an insight into your wider business model and the profitability of your business as a whole by keeping track of how much money is flowing in and out.
Having a clear picture of your financials helps you answer important questions and plan for the future. What are the biggest costs associated with running your business? Where do you earn the largest amount of income? These are all questions that can be answered by running a cash flow forecast.
Insight into these key metrics forms the basis for planning for success. Armed with that information, you can then ask more questions to improve your cash position– how can I lower my expenses? Which costs can I cut? And how can I focus on high-value work to generate more income?
Test out future plans
Cash flow forecasting is a way of predicting and improving your future cash position. To do this, we compare your predicted cash position with your actual cash position so you can see if you’re on track to meet your goals.
With cash flow forecasting software like Float, you can see how future plans will affect your cash position.
Every decision you make will ultimately have some impact on your cash position. Don’t dive head-first into launching a new product or hiring a new member of staff– be savvy about cash.
The most successful businesses we’ve seen are the ones that are mindful of cash flow. Mitigate risk and plan for the future by modelling out these scenarios first. Cash flow forecasting enables you to test out these plans and estimate how they will impact your cash position, so you can make smarter decisions about the future.
Plan for upcoming dips in cash flow
A solid cash flow strategy gives clarity on how your cash flow changes monthly or seasonally, so you can plan accordingly.
For ecommerce businesses, you can see how seasonal trends impact your cash position. This can help you take advantage of Black Friday and Christmas shopping season, or plan for a potential January slump in sales so you can see how much cash you need to set aside to account for them.
For businesses in the construction industry, you can plan for the purchase of equipment and materials and see how these affect your cash flow.
A solid cash flow strategy focuses on two central aspects– identifying, and then planning. Begin by spotting any surpluses or gaps in cash flow, and then take action to improve your cash position. This forms part of our wider approach to measuring, monitoring and improving your business.
A cash flow strategy allows you to make strategic decisions based on reliable data, as opposed to plucking figures out of thin air.
Cash flow forecasting software like Float removes uncertainty by helping you test out different scenarios before they happen.
If you want to hire a new member of staff, you can visualise how that will affect your cash position. You can see the impact of different start dates and salaries until you find the ones that work best for you, helping you make better decisions that positively impact your cash position.
Plan with clarity
Ultimately, every decision you make as a business will affect your bottom line.
To be successful, you need to know whether your plans will have a positive or negative impact on your finances.
This is where cash flow forecasting comes in.
A proactive approach to cash flow helps you see where you are underspending or overspending and plan confidently, so you can make better decisions to help you grow.
Kickstart your cash flow journey
We help ambitious businesses get where they want to be. Using cash flow tools like Float, we help you take control of your business finances and plan for the future with confidence and clarity.