Why Cash Flow Is the Lifeline of Your Business (and How to Actually Manage It)
- Apr 15
- 3 min read
Updated: Apr 18
Profit is great—I'm all for profit. But you should also be mindful of your cash flow.
Have you ever had a profitable month on paper but couldn’t make payroll or pay yourself? That’s the difference between profit and cash flow—one looks good on paper, the other keeps your business running.
Cash flow is about timing—when money comes in and when it goes out. And managing it well is one of the most important things you can do for your business.
Here’s how to stay on top of it.
Know Your Numbers
Start by understanding exactly how much money is coming in, what’s going out, and when. You want to be able to answer:
- How much do I make (on average) each month?
- What are my fixed expenses (things I pay every month no matter what)?
- What are my variable expenses (things that change month to month)?
A simple spreadsheet or accounting tool can give you this overview. You don’t need anything fancy, but you do need something. My DIY Bookkeeping Spreadsheet system is a great example that you don't need fancy software; especially when you're just getting started.
2. Project Ahead, Don’t Just Look Back
It’s easy to look at what happened last month and think you're in the clear. But strong cash flow management means looking forward.
Set time aside monthly to project:
- What invoices are coming due?
- What payments do I owe?
- Are there seasonal dips or big expenses coming up?
This helps you make informed decisions—like whether you can take that vacation or need to follow up with a client who hasn’t paid.
3. Collect What You're Owed
Cash flow problems often come down to unpaid invoices. You did the work. You deserve to be paid. Don’t let “being nice” get in the way of being paid.
Some quick tips:
- Set clear payment terms (and stick to them)
- Send friendly reminders before the due date
- Follow up consistently once an invoice is late
- Include a late fee in your contract to encourage on-time payment
The longer you wait to collect, the less likely you are to get paid.
4. Build a Buffer
If you're spending everything you make, you're walking a tightrope. Aim to build a cash buffer—even if it's small at first.
A good goal is to save 1–3 months of operating expenses in a separate savings account. This gives you breathing room when things are slow or emergencies pop up.
Even setting aside 5% of every payment you receive can start to add up.
5. Review Cash Flow Monthly (Not Just at Tax Time)
Schedule a monthly finance check-in to review your:
- Bank account balances
- Incoming receivables (what people owe you)
- Upcoming payables (what you owe others)
You can’t manage what you’re not reviewing. This check-in doesn’t need to take hours—even 30 minutes can help you make better, faster decisions.
One Last Thing...
Cash flow isn’t just a finance term—it’s your business’s oxygen. You need to protect it, monitor it, and plan around it.
Don’t wait for a cash crunch to figure this stuff out. Start now. Put systems in place. And remember: the goal isn’t just to make money—it’s to have money when you need it.
コメント