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We Specialize in Cash Flow Management Services

A wise business owner once said, "Happiness is a positive cash flow." As a business owner, I'm sure you agree. Everything is better when your cash-in exceeds your cash-out.

Cash flow problems can be devastating, and they can even kill a small business. If you've ever had to beg, borrow, steal or use a credit card to cover tomorrow's payroll, you know what I mean.

Even if there isn’t an explicit problem, a loose grasp on your business cash flow makes decision-making harder. Is it time to invest in new technology or make a new hire? Do I have enough excess cash to give everyone a bonus? Do I need a line of credit? A simple glance at your balance sheet won’t give you the information you need about your businesses’ financial health.

Cash is one of our favorite metrics. It’s what helps all the other metrics flow (and keeps your lights on).

Here’s how we help clients manage (and improve) their cash position.



Managing Cash Flow

1. Determine working capital

In addition to having a general cash account for operating expenses, we recommend businesses have an interest-earning cash reserves account that contains 10-30% of annualized gross revenue, or approximately two to six months of expenses.

The amount of cash will vary business to business, but to oversimplify: the riskier the business, the more liquidity your business needs.

Most businesses we sit down with don’t have 10% of annual revenue in the bank at first. That’s okay. It’s part of the process of maturing a business.

2. Forecast your company’s cash in real time

A real time, dynamic forecast that you review on a regular basis is the secret to avoiding a cash crisis. To monitor financial performance, there are two forecasts that you will want to keep tabs on that cover different time periods.

  • A short-term cash flow analysis (6-12 weeks) that looks at accounts receivable and accounts payable to watch for any potential shortages.

  • Long-term cash flow projections (1-5 years) that help plan for major investments, business expansion or even an owner exit.

We have a booklet that discusses the role of dynamic cash flow forecasting in ensuring business growth. It includes our best practices for cash planning, and much more.

3. Improve your cash balance

Sometimes you don’t need to work harder; you need to work smarter. As part of cash flow management, you need to look at your accounts payable to see if there are clients who regularly pay late. If your cash inflows aren’t matching with your cash outflows, it might mean improving payment terms to line up with industry standards, collecting higher deposits from clients, or changing your billing methods all together (for example, to a subscription-based model).

For more on how we handle cash flow management, check out this podcast episode. (Did we mention we love cash flow?)

Outsource Your Cash Management

If you would like assistance in preparing forecasts for your business, our Virtual CFOs can help you develop forecasts to better plan for the financial future of your business. 

Virtual CFO Consultation