What is Cash Flow? – The Key to Your Business Survival

Business Finance

By Staff Writer

“Revenue is vanity…margin is sanity…cash is king.”

what is cash flow? The key to your business survival - article for YBKBS small business magazine

You’ve probably heard people complain about cash flow and maybe wondered exactly what that means. Simply put, the money that comes into and goes out of your business is your cash flow. In good times, proper cash flow management is the key to profitability. In hard times, cash flow management is the key to survivability – allowing you, for example, to pay employees and your rent even when a major customer goes belly up. Think of cash flow as your business’s lifeblood. If it is interrupted – and this is true even for highly profitable ventures – it can lead to a business’s cardiac arrest.

Cash flow is really no different than a family budget, if you know what your monthly pay is and if you know what your expenses are, then you know whether or not you can afford to go out to dinner. That’s basic cash flow, knowing when to spend and when not to spend money.

Knowledge is King

Cashflow is about knowing when to buy things, how to buy things, and when you do buy them, knowing how much will be left over to pay for other expenses. As an example of questionable cash flow management, I once knew a printing business that got a big job, ordered a lot of paper to do the job, got paid for the work and immediately spent all the income on a brand new printing press. Unfortunately, the owner hadn’t paid the invoice for the paper. The result? 

The owner created a cash flow problem by failing to account for costs before making a major purchase.

You can avoid many common cash flow problems by speeding up the payments of accounts receivable – for example, by accepting credit and debit cards, issuing invoices and accepting payments electronically, or using remote cheque capture to deposit cheques directly from your office without making a trip to the bank. You can also head off cash flow dilemmas by running monthly reports – particularly an income statement and a statement of accounts receivable – on a regular basis. 

Once owners see the cash stream running every month, then they can prepare; they can start making changes. We’ll show you how to read and use these reports in later articles.

So here’s a question….

What do Richard Branson, Walt Disney, Coco Chanel, Henry Ford, Ray Kroc, and Milton Hershey all have in common?

The answer? They all created business empires without earning a high school diploma. But even though you don’t need a formal education to start a business, you still have to understand some accounting principles, take care of bookkeeping procedures, and most importantly, be able to make basic decisions based on your information. So, don’t let a fear of numbers keep you away from business finances.

So as we continue to write articles for YBKBS, we’ll try to update your ideas of how you can get used to maximising your knowledge of how you can have the small business you deserve by understanding your business finances.

Latest Articles

eKitchenette - Serving the food industry the CoVid era and beyond ybkbs small business news for smart business owners

eKitchenette: Serving the Food Industry in the COVID Era and Beyond

In challenging times, innovative solutions are called for. And for three local entrepreneurs from Leicester, the pandemic inspired them to come up with a creative way to support local restaurants and food businesses. 

Thomas Edde, Ali Datoo, and George Martin founded eKitchenette, an app that combines influencer marketing and online ordering to build a trusted community of food business owners, influencers, and consumers. I met Thomas via Zoom this week to learn more about the business and the team’s journey so far.

Vilma Jackson : Meet the Performance Artist Paving The Way for Deaf Creatives

Vilma Jackson: Meet the Performance Artist Paving the Way for Deaf Creatives

Multi award-winning Deaf performance artist Vilma Jackson has launched a new chat show featuring an all-star selection of Deaf panellists. The first episode of The Vilma Jackson Show was released on 11 March, and the second will follow soon. Episode 1 showcases the wide array of talent that exists within the Deaf community and the barriers Deaf people face, while the second will address the wider debate around diversity, inclusion, and equality as they apply to the Deaf community.

The Man Whisperer, Kenny Mammarella-D’Cruz where we talk about male mental health business, masculinity in the business world and his very unique perspective of lockdown and how it helped him, help men in business during it. YBKBS Small Business News for Smart Business Owners

Kenny Mammarella D’Cruz: Words of Wisdom from The Man Whisperer

Talking about mental health and struggles can be challenging, and this is often particularly true for men. Unfortunately, we live in a culture that does not encourage men to open up about their feelings.  But one man is on a mission to change that. As we mark the one year anniversary of lockdown this week, editor Marc chatted with Kenny Mammarella D’Cruz, also known as The Man Whisperer, about his vital work in the area of men’s mental health.


Founder Anneka Hicks Speaks Out: “Why I Left Excluded UK”

Founder Anneka Hicks has stepped down from Excluded UK to create a new venture dedicated to tackling the mental health fallout of the COVID-19 pandemic. Here she tells us why she’s stepped down from the group she founded, the toll it’s taken on her personally and fighting for the 3 Million self-employed and small business owners excluded from financial help from the UK Government.

Listen to Our Podcast...