Cashflow Management


Cash inflows and cash outflows

Ideally, during the business’ cycle, you will need more money flowing in than flowing out. This will allow you to build up cash reserves with which to plug cashflow gaps, seek expansion and reassure lenders and investors about the health of your business.

You should note that income and expenditure cashflows rarely occur together, with inflows often lagging behind. Your aim must be to do all that you can to speed up the inflows and slow down the outflows.

Cash inflows

  • payment for goods or services from your customers
  • receipt of a bank loan
  • interest on savings and investments
  • shareholder investments

Cash outflows

  • purchase of stock, raw materials or tools
  • wages, rents and daily operating expenses
  • purchase of fixed assets – PCs, machinery, office furniture, etc
  • loan repayments
  • dividend payments
  • Income tax, corporation tax, VAT and other taxes

Many of your regular cash outflows, such as salaries, loan repayments and tax, have to be made on fixed dates. You must always be in a position to meet these payments, to avoid large fines or a disgruntled workforce.

To improve everyday cashflow you can:

For further information, see how to manage income and expenditure.

You can also improve cashflow by increasing borrowing, or putting more money into the business. This is acceptable for coping with short-term downturns or to fund growth in line with your business plan, but shouldn’t form the basis of your cash strategy.

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