Why a business should understand cash flow and some tips around

Managing cash flow is crucial for the sustainability and growth of any business. Cash flow is simply the movement of money in and out of a business, and understanding it can mean the difference between well, success and failure. So what is the benefit of understanding your cash flow?

An understanding of cash flow helps businesses to:

·???????? Ensure Liquidity: By monitoring cash flow, businesses can ensure they have enough liquidity to meet their obligations, such as paying employees, suppliers, and other expenses.

·???????? Prevent Insolvency: Understanding cash flow helps avoid situations where outflows exceed inflows, leading to insolvency or bankruptcy.

·???????? Make Informed Decisions: Accurate cash flow analysis allows for better decision-making regarding investments, expenses, and savings.

·???????? Plan for the Future: By forecasting cash flow, businesses can prepare for future financial needs and avoid unexpected shortfalls.

Four useful tips to help manage cash flow:

·???????? Maintain a Cash Reserve: Always keep a reserve of cash to cover unexpected expenses or downturns in income. Having a few quid set aside can help you navigate through tough(er) times without disrupting operations.

·???????? Monitor Cash Flow Regularly: Regularly reviewing your cash flow ?can help you spot trends and potential issues early. This enables you to take corrective measures before it becomes problematic.

·???????? Negotiate Payment Terms: Work with suppliers to negotiate favourable payment terms that align with your outgoings or vice versa. Extending payment periods can help manage outflows more effectively and same goes if you need to bring extended (receivables) term in.

·???????? Invoice Promptly and Follow Up: Ensure that you invoice promptly, with all relevant back up and follow up on outstanding payments. Having and maintaining an efficient accounts receivable process can really improve your cash inflows.

Of course even with all of the above aligned there may be some gaps (timing). A product like Invoice Finance is extremely useful for plugging gaps as well as fueling growth.

Good news is that you decide when to draw down but also the facility can grow as your business grows.

All businesses require cash flow and not all are cash generative enough to fly solo on.

If you are interested in learning more about Invoice Discounting;

Visit Invoice Finance | Invoice Discounting | Factoring | BFS Ireland (bibbyfinancialservices.ie)

Or Call 01-2974911

We have been funding Irish SMEs since 2006.