Cash is king for the financial management of any company. Although it may seem that generating large revenue is the key to a business’ success, the most important contributor is the cash flow of the business.

Cashflow is the lifeblood of the business. It doesn’t matter how well established your business is or how high your profits are; if you fail to manage your cash flows effectively, the business will have severe difficulties to survive.

Cash Flow Management

Cash flow management is the process of monitoring and analysing the inflow and outflow of a business. It helps in the financial planning of a company, which involves predicting the company’s future cashflows and calculating how much funds are required to pay off the company’s obligations. Profitability analysis of companies can be made with the help of cash flow management which helps them achieve greater profits.

Importance of Cash Flows

Over 80% of businesses fail because of a lack of proper cash flow management. When businesses spend more than what they earn and are left unnoticed, it shall lead to Cash Crunch (or) Liquidity Crisis in the business. 

A cash flow statement shows the running cash available in business from time to time. It helps in identifying the movement trends in cash flows and keeps the company prepared for any problems expected in the future.

Both, having inadequate cash and excess cash in the business can adversely affect the company. Through proper cashflow management, these issues can be sorted and the businesses can even operate profitably.

How efficiently to manage the cashflows?

1. Prompt debtors’ collection

As it is not feasible for any business to make its entire sales on a cash basis, they will be opting for some credit to their customers. Managing the credit receivables will help them from a cash crisis. A few strategies to improve collections on time include offering discounts for quick payments, requesting customers to make deposits as and when they place a purchase order, tracking non-paying and slow-paying customers and avoiding further transactions with them.

2. Making timely payments to creditors

It’s always important to keep an eye on the business expenses and their respective due dates. This helps a company in a better position to negotiate repayment terms for the service utilized and goods purchased for the business. This in turn enables better cashflow rotation in the company. If the company is facing any difficulties with payment, it must be communicated well in advance and request for additional time to repay and honour the same. This will ensure trust among the companies. 

3. Plan the investments

Growth is an integral part of the organization and growth needs investment. Hence plan the investment in such a way that the operations are not hindered and capacity is also parallelly enhanced.

4. Understand the financing structure

If operational cashflows are short for the time being or long term plan requires support then, the source of financing and the repayment of the same needs to be planned and executed.

Tracking the cashflows every month can help to prevent major cash crises in the business. This verifies if adequate funds are being generated by the business to run smoothly. Making cash flow projections for the future can help the company take major decisions on expanding the business.

How C&B help you in Cashflow Management?

We, at Consulting and Beyond, can help your organization with efficient cash flow management for smooth operations in your business by identifying ways of maximizing inflows and shrinking outflows. This will help your company know when and how to grow its business. We help you with:

• Monthly fund plan which identifies total funds requirements
• Sets periodical measurable targets and efficiency parameters for each period and company as a whole.
• Measure the performance of each department, division, and cost/profit centre.
• Keeping track of Accounts payable and Accounts receivable
• Helps during raising funds from banker by identifying which banker to consider and negotiate on the interest rate. Also identifies whether to go with long term loan or with a Cash-Credit facility suiting the requirement.