Cash Flow

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Nothing is deadlier to a business than a lack of cash. Healthy cash flow, therefore, is essential to keeping your business alive and profitable.

You need to keep track of your cash flow if you want your business to function properly. We can help you iron out any kinks in your system and help you build your business on the most effective and profitable structure possible.

Cash flow is hardest to manage when you’re just starting out, but that doesn’t mean it’s easy to do when you’ve been running your business for a long time. No matter where you are in your career, we can help you get on top of getting the most out of your cash flow.

How Does Cash Flow Differ from Income?

Cash flow, in many ways, is the lifeblood of a company, but it does differ from income. To put it as simply as possible, profit and income are based on accrual accounting principles. These principles account for net income/earnings, expenditures, and more. In this sense, profit is built on cash flow, and managing a large cash flow properly is key to running a successful business. Needless to say, it’s also a major factor in accounting. 

Let’s say you own and operate a restaurant. Every time a customer comes in and pays for food, you’re receiving an influx of cash. However, just as much as you take cash in (though, ideally, not as much), cash goes out as you pay your staff, pay for ingredients, pay for advertising, pay for maintenance, and pay operating expenses like heating, air conditioning, and rent. This in and out motion as a whole is your cash flow. Profit and loss, in very simple, specific terms, is the gap between what you spend and what you take in—in many ways, they’re two elements of cash flow.

What Do You Want Out of Your Cash Flow?

Ideally, you want a large cash flow, as this will give you the most potential for bigger profits. With that in mind, it’s important to know that cash flow isn’t necessarily set in stone. Many businesses see their cash flow fluctuate over the course of a typical year—especially turbulent years like 2020. For many businesses, like restaurants in particular, cash flow is seasonal. Businesses that sell outdoor equipment, for example, do best during the warmer months. Liquor stores and supermarkets see their biggest influx of cash during the holiday season. Famously, gymnasiums rake in the most cash in January, when people vow to stick to their New Years’ resolutions to get in better shape. Some businesses operate based on contracts with clients, and their cash flow will depend entirely on how those relationships play out.

Ideal cash flow is well-scheduled, too. If you’re a business owner, more likely than not, you have debts to pay, or at the very least, you have cash going out no matter what. Without proper accounting, it’s easy for cash to get stuck in something like inventory, accounts receivable, or something else. Even if sales are good and you’re making a good amount of money, it’s no help to you if the cash isn’t flowing, and getting that cash “un-stuck” is your top priority. In essence, you can have cash without profit—mismanaging cash flow, even when sales are good, can be deadly for businesses, so no matter how successful you are, make sure that money is moving.

The Benefits of Cash Flow

More importantly than anything else, a positive cash flow gives you room for growth, and it goes without saying that when it comes to business, growth means profit. Having the option to constantly re-invest in your business through buying new equipment, purchasing land, or hiring new staff creates opportunities that simply aren’t possible with a negative cash flow. Plus, that’s not to mention the financial freedom you’ll have when you invest your cash wisely—less reliance on banks for money means more freedom for you and your business.

Naturally, as you begin to invest in your own business, the quality of your products or services will improve, and you’ll gain a natural competitive advantage in your field. From here, you’ll be able to start thinking long-term. How much growth do you want, and how are you going to make it happen? More importantly, the reality is that you’re not going to be working forever. When it comes time to retire, you might want to sell off your business for an incredible sum. Strong cash flow is extremely appealing to investors and buyers—the better your cash flow, the better your chances of getting a good deal!

How Do I Manage my Cash Flow?

Managing cash flow isn’t as easy as it sounds. As stated above, you can run a highly profitable business and still run into cash flow problems that cause it to crumble. One of the best things you can do is put in some research to gain a fuller understanding of cash flow and how to make the most of it. There is practically an endless number of resources online to help you figure it all out and get your business “un-stuck.” If you’re having problems with cash flow, then, in all likelihood, you’re not the first to have that problem. With some searching, you should be able to find multiple businesses that had the same problems you’re having, and how they actually resolved them. 

Your best bet, however, is to hire a professional CPA, and when it comes to cash flow, you won’t find a better expert than me. As a CPA and profit coach, I’ve been helping business owners maximize their profits and tax savings for years. In the last five years alone, I’ve saved my clients nearly $7 million total, and that number speaks for itself.

If those are the kinds of numbers you want to see, let’s get in touch—take a look at my coaching programs here and we can figure out what works best for you. If you work with me, I’ll help launch your business to new heights and, like I always say, make this your most profitable year ever.