Cashflow management is undeniably critical for the survival of any business. Although profits may sustain you temporarily, businesses cannot thrive without steady cash flow. Consequently, managing cashflow ensures that your business can handle unforeseen expenses, adapt to changing circumstances, and maintain financial stability.

Build a Safety Net with Cash Reserves

Firstly, creating a cash reserve is a vital strategy. A reserve covering three to six months of operating costs provides a financial cushion during emergencies. This approach is especially useful if unexpected challenges arise, such as a sudden drop in revenue. Therefore, aiming for this buffer can protect your business during turbulent times.

Prioritise Cost Control

Secondly, practising cost consciousness helps maintain financial discipline. Even during periods of high revenue, sticking to a minimum viable budget is essential. Furthermore, keeping costs in check during good times prepares your business for potential downturns.

Manage Inventory Wisely

For product-based businesses, poor inventory management can severely impact cashflow. Besides tying up funds in stock, overstocking can lead to wasted resources. Consequently, maintaining a balance between supply and demand ensures your cash remains accessible for other needs.

Consider Leasing and Loans

Instead of making outright purchases, leasing equipment offers flexibility and preserves cash reserves. Additionally, equipment loans can provide financial support with manageable repayment terms. Moreover, borrowing during good times often secures better rates, offering financial breathing room when you need it most.

The Role of Expert Guidance

Lastly, hiring a skilled accountant helps identify cashflow issues early. Professionals provide forecasting and budgeting support, ensuring your business avoids financial pitfalls. Additionally, tools like Xero can simplify cashflow tracking, offering greater clarity for your financial planning.

Keep Your Business Healthy

In summary, cashflow management involves maintaining reserves, practising cost control, and utilising resources effectively. We encourage you to maintain these habits and seek expert advice to keep your cashflow strong. Listen to the I Hate Numbers podcast to gain more insights on managing your business finances effectively.

Good cash flow management is vital, nay critical, to the success of your business. In fact, it's a stated truth. Now, if your business does not have access to cash resources, does not have access to the ability to manage cash flow correctly, then survival is going to be seriously questioned. You can survive without making profits for a period of time, but you can't survive without

access to cash. So it's vital that as a business owner, as somebody who runs a business cash flow, though, it may feel like the headache and pain of your life is an absolute necessity. And in this week's podcast, I've got seven strategies to make this process easier and to ensure that your business stays on track for financial success.

Let's dive into it. Number one, create a cash reserve. That's always a good idea to have a safety net in place. A cash reserve is going to help you to cover unforeseen costs. Keep your business afloat. Should there be any change in activity, should the outlook be bleak, should disaster strike, you're going to be covered.

As a rule of thumb, and this is something I borrowed from the not for profit from the arts and creative sector, three to six months of operating costs of average cash flow is a good buffer to have. Think about if your business stood still and no more customers bought from you. How much money would you need to keep ticking over for the next three to six months?

And that's your aspirational target. Number two, cost consciousness or frugality if you prefer. And every business owner knows it can be difficult to find a balance between growth and cautious spending. However, it's important to develop a minimum viable budget. Yeah, I use that word budget and continue to stick to it.

Even when cash is flowing into your business, having that sense of financial discipline is really an important thing to adopt. Good times don't always last forever. And if you're unable to save money when the going is good, it's going to be pretty tough to do that when times get tougher. Number three, if you're a product-based business, keep an eye on your inventory.

Managing your inventory poorly will create a lot of expensive problems which will impact severely on your cash flow. It costs money to acquire the inventory, that's money tied up. It costs you money to hold inventory and it costs you money to manage inventory. So we need to make sure that balance of how much inventory we need to fulfil demand, not overstocking, not having obsolete inventory items that we're carrying, that's dead money effectively until it's sold.

We need to make sure that balance is correct. Now, when you don't organise your inventory correctly, there may be items you misplace, that aren't stored correctly, they become obsolete or damaged, and we might end up ordering replacements that we don't actually need. The next thing to consider is about leasing your equipment.

Now, some business owners prefer to purchase assets outright and to own them, and purchasing equipment in its own right might prove to be more effective and cheaper in the long term, and it may have an impact on profitability, but it also might damage your cash reserves in the short term. Investing buying expensive upgrades can present a real problem when funds are tight. Now, leasing again on one respect might be more Expensive however, it's going to free up cash flow It's going to be less cash commitment less cash outflow going out of your bank and it helps you to monitor and regulate your cash flow more easily. In a lot of leasing higher purchase arrangements here, you may have the option to purchase the equipment outright at the end of the term of the agreement or to even upgrade.

Number five, equipment loans. Now, instead of purchasing outright, you might want to consider something called an equipment loan. And this type of loan functions in much the same way as a traditional bank loan, but the risk profile is lower. The market is there for you to have a shop around. And have a look at those options about how you finance and fund that equipment.

And again, an equipment loan may be something that's going to be more suitable for your business type. Now this might seem a contradiction in terms, but the next thing to consider is you borrow when the going is good. Now prevention is always going to be better than the cure. So borrowing money when your finances are looking good may actually prove to be a good thing for you.

But it's running a line of credit now until you'd be able to use it later than risk rejection from the bank when you're already in peril. In addition to this, seeking a loan when your business is in good financial health gets you better rates and it gives you the freedom to shop around. Now, the last one, and I'll give you a bonus at the end, is to hire a good accountant.

Now, cash flow problems often sneak up on business owners, they shouldn't do, and it definitely pays to have a professional on site who can spot problems from a mile off and give you solutions before your business starts to suffer. In my own practice, I Hate Numbers, and through Numbers Knowhow, we support a number of clients by helping them do forecasting, preparing budgets. Having a look through the windscreen of your business is better than getting caught out by unexpected surprises.

Now, good cash flow management folks in summary is about preparing for the worst and maintaining those sensible, yep, sensible financial habits. Even when the going is good. Creating that cash buffer, that cash reserve, remaining cost conscious and keeping on top of your inventory, you can protect yourself against the cash flow problems that cause havoc on many

small businesses. It's certainly worth considering borrowing during the good times and considering equipment loans or leases rather than shelling out cash immediately. Maintain a healthy cash flow. Make sure you've got the accountants advising you and helping you with your forecasting and making sure your bank balance stays as healthy as it can for years to come.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.