Cash is one thing that is necessary for a business, household, or any type of systematic activity. A cash flow holds up the fort and keeps the castle running. Cash incoming and outgoing is a matter of concern for all. It is no secret how difficult it is to keep your expenses in check with your income.
To keep a positive cash flow, a business needs to have a platform like Odoo platform to merge and efficiently manage all its activities and tasks. Platforms depend on systems like Clover and Moneris to keep track of the sales and transactions to know about the cash inflow and outflow.
Cash flow management is one of the most important yet tough tasks to do for your business. It is the pillar upon which the business depends the most at each stage of its growth.
What is Cash Flow Management
Cash flow management is managing your inflow and outflow of money in a specific period. The cash inflow must be more than the outflow or the expenses to survive. Cash flow is about timing.
Cash must be present at the right time to be able to pay the expenses. Having cash after your payments are due is not good management. In business, everything is interrelated, so payment of the expenses is directly related to the cash that comes in from sales. Sales transactions are easily facilitated through Clover and Moneris.
Cash flow management is when you analyze, monitor, and optimize your cash inflow receipts. This is a process that requires planning and management. The cash must be able to exceed the expenses for the period.
Types of Cash Flow:
There are various types of cash flowing in the business. They are led by different departments and activities undertaken by the business. Following are the cash inflows.
- CFI Cash Flow From Investments: Cash flow from investment is a return. It is seen how much cash is generated by a specific investment in a specific period.
- CFO Cash Flow From Operations: It is the cash coming from the day-to-day operations, like sales of goods. This inflow is the major chunk that is responsible for most of the cash outflows as well.
- CFF Cash Flow From Financing: The cash flow from equity and capital is the cash flow from financing.
All these different cash inflows are managed and optimized to ensure greater revenue generation at the end of the day.
Benefits of Cash flow Management
A well-managed cash flow has a lot of benefits for the business. Some of the benefits are:
- Forecasts of shortfalls: It is easy to determine the near future by knowing your financial standing. If your cash flow is managed well, you can predict a shortfall even a year ahead and plan accordingly.
- Leverage: A well-managed cash flow will gain the trust of lenders and your sourcing partners. In this way, if you face a shortfall and want leverage, you will get it without interruption in your process or any difficulty.
- Improve Budget accuracy: When you know your cash inflows and outflows, you can easily plan your budget for the upcoming period.
- Growing: A business needs to expand, but you need to know when to invest and when to expect returns from the investment. Cash flow management helps you make such decisions.
Cash Flow Problems
- Seasonal shortfalls: If the business is seasonal. There may be a pattern of low cash inflow during the off-season. This may be hard to manage with stagnant cash outflow.
- Speedy growth: The company may be expanding at a faster pace. This will cause a shortage of cash flow. The incoming cash may be getting invested in activities other than forecasted.
- Inaccurate projection: The projection of inflow and outflow of cash should be as accurate as possible. Inaccuracy of projections can be misleading and result in a negative cash flow.
- Lack of systems: Systems like Clover and Moneris are a life-saver in daily business transactions and when analyzing your cash flow. Such systems can result in chaos.
How to Handle Cash Flow Problems
Handling cash flow problem is a tough job but an important one. Management is a key factor in handling all the problems that may arise.
- Delay expense payments: If you have an expense to be paid off, but there is still time left to when it’s due, it is better to let the expense stand still and you put your cash flow towards more pressing matters.
- Cash flow analysis: A regular analysis is a must. The company’s owner or manager must do a weekly/monthly/quarterly, and yearly analysis of the cash flow. Cash flow analysis can be done with the help of the Odoo platform and Clover and Moneris.
- Credit dependency: Rather than paying cash for large orders, you can make an account and take the stock on credit. This will increase inflow and delay outflow.
- Cut expenses: It is a basic step. To increase cash retention in the business, you must cut expenses.
- Plan B: Always have a reliable source of income that can come in handy in desperate times of need. This will ensure smooth sailing.
- Rely on Technology: Platforms and systems are your business’ best friend in these times. Systems track and record all the transactions making it easy for you to have a forecasted cash flow and helping you avoid shortfalls.
- Avoid utilizing funds: For your payment of expenses, only use the cash inflow. Do not use any funds or liquidity in your investments to make payments for your expenses. This will also give your business a bad impression on your investors or other credit parties.
Cash flow management is relatively easy; thanks to technology-driven systems like Clover and Moneris, cash flow management is not so hard. Cash flow management and cash flow analysis are extremely important for a seamlessly running business. Your business needs a strong and reliable system to lay back upon while making forecasts based on the cash inflow and outflow. These systems will also track your cash outflows and ensure positive cash flow.