Cash Flow – Counting The Beans

I’ve mentioned before about the importance of cash flow and how if left to spiral out of control will be the undoing of your business dreams and aspirations. Cash flow is defined as the amount of cash we need to payout within a set time frame in order to avoid a negative balance or a strain on financial resources. Calculating cash flow will give you a snap shot of what cash is available to you right now, a cash flow forecast is different, this projects (in a time frame of your choosing, so weekly or monthly etc…) what cash will be in the business at a future date based on sales made against business expenditure, again both of which will be forecasts.


If you’re planning an injection of funds into your business the loan provider or creditor will definitely ask to see a cash flow forecast. While the actual progress of the business is unlikely to exactly mirror the forecasted path, it is important that we understand our business is financially sustainable and that we can balance the money owed to suppliers with how fast our customers settle their invoices. There are a number of free templates to help us with this task, I like the simplicity of this one from Startuploans.

What happens if our business takes off far quicker than we had anticipated? Putting a strain on the cash available to purchase supplies while we’re still waiting for sales invoices to be settled. Well here’s a tip that may assist us in forecasting our cash flow more accurately. Take our forecasted number, in whatever time frame, weekly, monthly or annually, then add 20% to this figure to allow for a faster growth than anticipated, conversely to see what this number will look like should our sales be slower than expected we just -20%. You can see that this calculation will give us 3 numbers, the original forecast our realistic desired outcome, a higher number in case things take off and a lower number should sales be more challenging than expected. So long as we can still manage our cash within this range then the business is in good shape.

Of course there are other things we can do to aid the cash available to us in the business, ensure we have reasonable invoice terms with our customers, most business to business (B2B) invoices get settled 30 days after it is raised, but beware, I’ve heard of and seen some invoice terms at 120 days that’s 4 months later. Be upfront about your invoice terms to a new customers these can always be negotiated, it’s better to know now than having to chase what you might think is an outstanding invoice when your customer believes they have time to pay.


Factoring or invoice discounting can be done through most banks for which there is a nominal fee. It does mean however that your invoices are paid immediately to your account by your bank who now take control of the risk and the debt.This will help with the immediate cash available in the business. There are a number of organisations competing in this market place, if you think this will benefit your business, find out more here.


Check your suppliers invoices before signing them off for payment, all too often charges creep up hoping we are too busy to notice and just pay the outstanding balance. This will eat into your profits, an expense we can ill afford in any business. Review your costs against  the market average, are we paying a fair price for the service we receive? Knowing exactly what is expected to be paid in and out of your business account will allow you to plan and invest.

Ultimately, deciding how you manage the money in your business will depend on the type of business you’re in and the plans for growth you have in place. Online businesses fair better than most in as much as they are paid for the product before despatch and can therefore plan future sales lines in advance. Or even take advantage of the many drop shipping Companies that have sprung up across Europe. If our business relies on customers paying their invoices on time, then focusing enough resources to manage this will pay dividends in the long run, as the saying goes, CASH IS KING and never has it been more important to count the beans.

Please get in touch if you have any questions.

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