A man working on a cash flow for a business

Realizing the Importance of Cash Flow

Do you have a cash flow problem?

Many early stage companies become hyper focused on metrics that drive revenue, such as sales and marketing.  Although these areas are important, the financial metric of cash flow should be watched carefully, especially in the early days of a company. According to a U.S. Bank study, 82 percent of business failures are due to poor cash management.

Cash flow projections have two basic components, money coming in and money going out. Both are equally important but it takes careful accounting and constant monitoring to make sense of it. Making the sale doesn’t mean you have the money and incurring expense doesn’t mean you paid for it already.

A cash flow informs business decisions

Most businesses don’t realize that it’s a lot easier to spend money than to retain it. Being mindful of how and when cash is leaving in the form of expenditures is extremely important. Being in the black doesn’t mean you can spend. Another area of heavy spending is when companies begin to grow. Growth is usually expensive for the simple reason that the faster a company grows the more capital is required. This is the time to closely monitor, project and maintain cash flow reporting.

In the case of many software as a service (SaaS) companies, customers’ payment is made at the beginning of the year. It can be very challenging to balance the monthly and quarterly cash burn to last through the end of the year. Maintaining accurate cash flow projections based on company goals can ensure that those goals are achieved but are also measured by the cash flow metric.

Need help creating a cash flow for your business?

Feel free to use our template, we even walk you through how to use it. Our cash flow template is annotated so that you can understand where to put things, how to forecast your cash, cost of goods sold (COGS), payroll, and operating expenses. You will find that it is simple to customize, easy to use, yet precise enough to give you the confidence you need to keep your company on track and money in the bank.

Our cash flow template is in Excel format. If you have questions, please reach out to us and we will be in touch with answers.

Download Our Cash Flow Template

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Use your cash flow to forecast and plan

With the right cash flow projections and reports, business leaders can make the right decisions at the right time. In business, timing and decision making is what breeds success or expedites failure. Cash flow reporting and accounting is, by nature, a complex process but having the right partner to help with this aspect can make it simple.

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