I’m sure, as a business owner, you hear all the time about the importance of cash flow. About how cash flow is the lifeblood of your business. About how much better your world would be if you had “more cash flow”. If you had “better cash flow”. If you “optimised your cash flow”.
The thing that most often gets left out when someone, be it your accountant, your bank, or that finance company sales person tries to sell you something is why. Why would your life be better if you had better cash flow? Your customers are paying you, not always on time, but the money is coming in. You’re paying your suppliers, again, maybe not always on time, but the bills are getting paid. You’re covering your costs, your overheads, running your business. Why do you need to improve your cash flow? How would this make your life better? And why should you invest the time, money and effort to improve it? Can we give you a good reason?
No. We’ll give you 5.
It will save you money
Having surplus cash in your business will save you money. If you have extra cash sitting there and you do have unexpected expenses and need it, it’s there. You don’t need to put the cost of those unexpected repairs on a credit card or rely on a bank overdraft. It also means you can afford to pay your suppliers on time, even early, meaning you can take advantage of any early payment discounts they may be offering, not only saving you money, but helping to improve your cash flow further. Already have business loans? Now you can pay them off early and save on the interest. Improving your cash flow decreases your reliance on borrowing, giving you greater control of your finances, and more flexibility financially.
It will help you grow your business
Better cash flow means having extra cash to re-invest back into your business to help it grow. This could be in the form of increased advertising and marketing activities, growing your brand presence and market share. It could also mean taking advantage of new business opportunities, ones you may previously have shied away from due to cost of pursuing the opportunity. It could mean improving your means of production, investing in newer production machinery (which could be anything from new, faster computers for staff that cut down wasted time, to a bigger, better production line in a factory, or even the move to a larger factory itself). Or it could mean the funding to expand into new markets or develop new products. Whatever business growth means to you, having more cash on hand will help you achieve it.
It helps you manage your new growth
New business growth won’t be much good for your business if you can’t effectively manage it. Having optimal cash flow management will allow you to effectively manage new business opportunities and growth, be it helping you effectively meet the new demand, hiring and training new staff to help cope with the increased workload, or employing specialist consultants to get the most out of your new ventures.
It helps give you control
Talking in fairly broad terms, say you have a new business opportunity come up. You’re going to need some working capital to take advantage of it, but you don’t have enough with the cash you currently have on hand, but you have a customer who is due to pay you in 30 days still in time to take advantage of that opportunity. You’re taking the gamble they’ll pay on time, and you’ll have the capital you need. Instead, with the right funding solution, you could get that cash today. This would give you a greater measure of control over your business, and your ability to effectively make decisions for your business and its future. Instead of having to wait to see if that customer pays on time a month from now, you know exactly when you’ll have it and are able to use it straight away.
It will help you save for your future
Let’s face it, if you own a business, your ultimate goal is to one day retire from that business and enjoy your best version of retirement. Having excess cash flow means a greater ability to save for that goal, and a greater control on how you manage the business.
There are several things you can do improve your cash flow position. Timelio’s Growth Manager David Webster has written at length about the ins and outs of practically managing cash flow, which can be found here. Alternatively, if you’d like to discuss your business cash flow and how Timelio can put you back in control, you can email David at email@example.com.