CF

Running out of cash is one of the main reasons for a business failing. Many a good business with a brilliant product or idea has collapsed because it failed to adequately manage its cash flow. Having a robust approach to cash flow management and making it an integral part of everyone’s job will go a long way to ensuring that your cash balance stays on the positive side of the ledger. In this article we share some tips on how to manage your business’s cash flow.

Be informed

In simple terms, cash flow management is the process of planning a company’s schedule for paying bills and estimating when income is likely to be received.

The most important part of good cash flow management is being informed. Do you know how much cash flow your business generates each month? Is cash flow even measured in your organisation? As a company are you billing on time and chasing up creditors? If you are unsure of the answers to these questions or can’t easily put your hands on the information then you probably need to make sure that you are better informed about your cash position.

Make overt connections

Do your employees understand the importance of cash flow? Can you explain what it means to everyone in your organisation? Whether you present it as opportunities for growth, new equipment, new staff, better research and development or simply a case of survival in a competitive world, every staff member should understand how cash flow relates to them. Employees that make the connection as to how their daily tasks contribute to generating cash flow is one of the major contributing factors to good cash flow management. To help staff make those connections try opening up a dialogue. It may help to ask questions such as:

  • What would happen if we…?
  • How could we…?
  • What if we…?

The emphasis here is on the ‘we’ with its notion of joint responsibility and collaboration.

Recognise those who succeed

When staff members have been successful in increasing cash flows within the organisation, it’s important that you recognise their efforts. This could be with an informal email or through a more formal reward process such as employee of the week. Recognition is an important motivator for all of us. Those employees that either add to cash by increasing revenues or save cash by cutting costs should be recognised throughout the organisation. This will also serve to reinforce to staff members the importance that you attach to cash flow management.

Cash flow management is not a one-off task. It’s not simply a case of preparing a cash flow plan, ticking the ‘done’ box and filing it away. Good cash flow management involves constant revision, vigilant checking and the commitment of all staff to make sure your company doesn’t run out of the readies.