Staying ahead of the cash flow curve


As a small business owner, the current economic climate can be quite daunting and unpredictable. This can become quite worrisome, but there are measures that we can take to safeguard against unforeseen circumstances that can lead to a business closing its doors. One such unforeseen circumstance is cash flow management. A business is only as strong as the revenue it generates. One profitable month does not negate the threat. Cash flow is the lifeblood of a small business and feeds into other aspects of the company, e.g. rentals, salary payments, expense management, etc.


Further below we will unpack a few of the causes of poor cash flow as well as measures to protect your business against it.

What could go wrong?

  • A decrease in revenue: Sometimes revenue is not as high as anticipated and this could be for a multitude of reasons, both predictable and unpredictable.

  • Late payments: When clients end up defaulting on debt, this can negatively impact cash flow, especially if the funds have been earmarked for other payments. This can put your business in jeopardy and thus prevents you from paying your bills.

  • Unforeseen expenses: These are exactly that, anything from a natural disaster to an essential operational piece of equipment breaking. There is not much that can be done to pre-empt, but measures can be put in place to ensure that these unexpected costs do not sink your business.

  • Seasonality: Most businesses operate within a seasonal climate. Periods where revenue is higher than others.

  • Taxes: Irrespective of the frequency at which you pay your taxes, it is vital to your business health to ensure that you have funds available to make these payments.

What can I do?

Any business, irrespective of its size is affected by seasonal change. A season can be defined as the time of year, economic cycles such as financial year end, political circumstance, and even location. Whatever the reason, a seasonal shift could alter the path of your small business. Unfortunately, there is very little that can be done to prevent or dramatically shift these fluctuations, but we can certainly maintain cash flow and ensure that we are managing a healthy business during downturns.

  • Identify seasonal shifts: As an owner, it is vital to have an honest look at your business to identify the most lucrative time periods versus slower months. Should you have an established company with records, recognise where cash flow has been more fluid and expenses lower. Should you not have any track records, it is suggested you look at competitor patterns and statistics. Try and find businesses that have similar attributes about size, location and production. Similarly, as you are relying on competitor research, document real-time data of your own business.

  • Account for variable expenses: Fixed expenses are a lot easier to recollect and include in cash flow forecasts; however, the variable costs that are often overlooked, also impact our cash flow quite substantially. To collate our cashflow fluctuations effectively, these figures will need to be taken into account as well. These costs range from quarterly tax payable, annual insurance premiums or client entertainment and the like.

  • Consider alternative funding: Despite best efforts, the proverbial rainy day does sometimes rear its ugly head. Factors could be due to an unexpected expense, or the business did not bring in as much revenue as anticipated. The best way to manage and plan for this it is to consider alternative loan solutions like a short-term business loan, this will provide you with small to medium cash injections for any staff, or daily operational needs. There are several options available to you that can be tailored to your specific financial needs.

  • Refine forecasts: Create and maintain a 12-month calendar and ensure that it is updated at the end of every month. Updating your projections regularly will ensure that you always have an accurate snapshot of your business that will allow you to take full advantage of higher cash flow periods and anticipate cash shortages.

Managing cash flow is one of the best things you could do for your business. As a business owner, it is vital that you look at this from an objective viewpoint and not be overly confident. The more accurate your forecast, the better equipped you are to make the best decisions for your business.