Business cash flow is one of the most important numbers to watch if you want your business to survive and thrive. Money in the bank helps you pay suppliers, staff, freelancers, loans, tax and yourself. When cash stops moving through the business, even a strong idea or profitable-looking business can quickly come under pressure.

About this episode

Keep an Eye on Your Business Cash is episode 2 of the I Hate Numbers podcast. This episode focuses on one simple but powerful idea: if you do nothing else, keep an eye on the money in your bank.

We explain why cash matters, where business cash comes from, what happens when bills go unpaid, and why looking beyond the headline bank balance helps you understand what is really going on.

If you want to connect this topic with the wider financial picture, our episode on Understanding Your Financial Statements: Cash Flow, Profit and Balance Sheet is a useful next step.

Why business cash flow matters

Think of cash as the fuel in your business. A car can look beautiful, but without fuel it will not move. Your business works in the same way. Without cash or access to cash, things can come to a halt.

You need cash to pay suppliers, pay staff, hire freelancers, invest in equipment, run your office, market your services and keep the business operating.

This applies to every business, whether you are new, established, small, growing or already well known. Above almost everything else, survival depends on whether cash is available when you need it.

Key points from this episode

Cash is the lifeblood of your business

Cash is not just a finance term. It is the money that allows your business to function day to day.

Without cash in the pipeline, money in the bank or access to short-term funding, you may struggle to pay the people and organisations your business depends on.

That pressure can affect suppliers, staff, freelancers, lenders and your own ability to take money from the business.

What happens when cash runs short?

When cash runs short, the pressure spreads quickly. Suppliers may stop supplying. Banks may expect loan repayments. Staff may lose confidence if wages arrive late. Legal action and reputational damage can follow when debts remain unpaid.

Some suppliers may give you time, but you cannot rely on that. They have their own businesses to run and their own cash flow to protect.

That is why keeping an eye on business cash is not optional. It helps protect the future of the business.

Where does business cash come from?

Your customers should provide the main source of cash. They pay for your products, services and value, and that cash should help cover bills and leave a surplus for the business.

Other sources may include borrowing, personal funds introduced into the business, or selling items the business no longer needs.

Borrowing is not automatically bad. It can make sense when you are starting up, investing or developing a new area. However, borrowed money still needs repayment, so you need to manage it carefully.

Look beyond the bank balance

Looking at your bank balance helps, but it is not enough. The balance tells you what is there now. It does not always show what needs paying soon, what belongs to someone else, or what commitments are coming.

A healthy-looking balance can create false comfort. You may already need some of that money for suppliers, staff, PAYE, tax, freelancers or other bills that have not yet left the account.

The practical question is simple: how much of that cash can the business really use?

Check what is going in and out

Get used to looking at your bank statements. Do not just glance at the balance. Look at the money coming in and the money going out.

Review the last two or three months and look for patterns. Which payments repeat? Which costs are essential? Which costs support future business? Which payments need questioning?

This is not about cutting every cost. Some spending supports growth, delivery and future income. The point is to understand what the payments are and whether they make business sense.

Customer payments drive cash flow

Customer payments sit at the centre of cash flow. When customers pay late, cash can become tight even when sales look good.

That is why invoicing, payment terms, follow-up and credit control matter. Getting paid promptly keeps cash moving and gives you more control.

For practical steps, listen to Getting Paid on Time: Practical Steps to Protect Your Cashflow.

Cash, profit and survival

Profit matters, but cash keeps the business alive. A business can look good on paper and still struggle if money does not arrive quickly enough or leaves faster than expected.

That is why business cash flow links closely with working capital, unpaid invoices, stock, supplier bills and everyday commitments.

Our episode on Working Capital Explained: Why It Matters and How to Improve It explains how cash, customer accounts, inventory and short-term debts connect.

What to check regularly

• How much money is in the bank today?
• What customer payments do you expect soon?
• Which suppliers need paying?
• Do wages, freelancers or contractors need paying soon?
• Are tax, PAYE, VAT or loan payments coming up?
• Which costs repeat every month?
• Which payments support future business?
• Which costs need questioning?
• How much of the bank balance have you already committed?
• What action should you take if a cash gap is coming?

FAQs about business cash flow

Why is business cash flow important?

Business cash flow gives you the money needed to pay bills, suppliers, staff, loans, tax and yourself. Without cash, the business can quickly stop operating.

Is profit the same as cash?

No. Profit and cash are different. Profit may show that the business makes money on paper, while cash shows whether money is available to pay commitments now.

Where should business cash come from?

Customers should provide the main source by paying for goods or services. Cash can also come from borrowing, personal funds introduced into the business or selling items the business no longer needs.

How often should I check business cash?

Check cash regularly, not just at year end. Looking at bank activity weekly, or more often during tight periods, helps you spot problems early and take action.

Episode Timecodes

• 00:00 – Introduction to episode 2
• 00:27 – Why money in the bank matters
• 01:08 – Cash as the fuel in your business
• 01:51 – Why cash matters for businesses of every size
• 02:26 – Paying suppliers, staff and business commitments
• 04:06 – Where business cash comes from
• 04:54 – Connecting closely with your numbers
• 05:11 – Looking properly at your bank statements
• 06:25 – Understanding regular payments and commitments
• 07:02 – Asking how much cash is really yours
• 07:51 – Cash as the lifeblood of your business
• 08:20 – Taking action when cash problems appear

Related episodes

• Getting Paid on Time: Practical Steps to Protect Your Cashflow
• Cash Flow Management Tips : 5 Essential Tips
• Build Your Cash Flow with a Spreadsheet: Create a Practical Forecast

Key takeaway

Business cash flow is the lifeblood of your business. If you do not understand what is coming in, what is going out and what you have already committed, you can lose control quickly.

Keep an eye on your bank account, look beyond the balance, review regular payments, understand what cash the business can really use and take action before problems grow.

Plan it, Do it, Profit.

“Cash is the fuel in your business. Without it, however brilliant your idea is, the business cannot keep moving.”

Further Support

The I Hate Numbers podcast helps business owners understand accounting, tax, finance, profit, cash flow, and business planning in a practical way. We simplify financial topics so you can make better decisions and feel more confident with your numbers.

You can also watch more practical finance and tax support on the I Hate Numbers YouTube channel, or listen and follow on Apple Podcasts.

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You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks, and welcome to episode number two of the I Hate Numbers podcast. Thanks a great deal for everyone sharing their love and thoughts from last week's episode and this week when I was thinking about what topic should I be talking about on the podcast, I was thinking, okay, what's been important to me in my business, my clients’ business, other businesses I see around the world,

the one thing that if you do nothing else at all, you need to keep an eye on in your business here that's going to make sure not only do you survive, but you thrive and you're here tomorrow, the next week and the year after? That one thing that you need to really keep an eye on is money in the bank. Cash, cold hard cash.

The cash that you can see on your bank statement, that physical stuff, the coins, the notes in your wallet or your purse. Now, a question you might be asking yourself is, you know, why is cash so important? Cash is important if you take the example of you're driving in your car, if you've got no fuel in the tank, your car could be the best looking car in the world, but it's not going to go anywhere.

And it's exactly the same in your business. If you have no cash in the pipeline, if you've got no access to cash, if you've got those resources that are missing, then you won't be able to pay your suppliers, you won't able to pay your staff, you won't be able to invest, you won't be able to take money out for yourself, and effectively things will come to a grinding halt.

Now, if you're thinking there, well, you know, it doesn't really apply to me. It only applies to the big boys. It doesn't matter how large your business is. You could be an acorn-size business. You could be a dramatic oak of a business. You could have been here for several years, or you could be a relatively new kid on the block.

The one thing that determines survival, above everything else is that cash item. Again, you may be thinking about, you know, why is it so important? Well, have a think about the impact on there. In order for you to operate your business, you need people to supply goods and services to you, so you need to buy materials.

If you're making things, you need to perhaps hire staff, hire freelancers. You need to spend money on running your office. You need to spend money on a whole variety of things, marketing campaigns are the like, in order to keep that business operating. Now, if those individuals and businesses are willing to say, have the item and pay us later on, if you aren't able to honor that and pay your bills on time, then a number of things will happen.

Some may cut you slack and say, that's fine. Pay us as and when you can. The likelihood of that occurring that often is going to be few and far between. Number two, they may, because they have their own businesses to run, expect you to pay promptly, and if you don't pay them, then they will cut supplying you.

Now, if that supplier is important to your business and you are, they're not supplying you, you are going to find it very difficult to operate without them. In a worse case scenario, if they feel that you're not actually cooperating, you're not playing ball with them in terms of paying their bills, then they can actually seek to have legal address against you and you'll end up going to court.

And again, that's going to be a very tricky time-consuming and a reputational impact to your business there as well. Not something you want. Follow the same thing, if you've borrowed money from the bank, banks will want to be repaid. If you've got staff and you don't pay their wages, a) that's not a very good thing in the first place,

but secondly, loyalty only goes so far. Staff have got families, they've got money they need for their own lifestyles and living. Therefore, if you can't pay them, they'll probably go elsewhere. So, if you don't do that side of the equation paying out, then you're going to find it very difficult. Now, where does the money come from?

Well, predominantly the main source of that cash coming into your business should be your customers. Other potential sources that you might want to draw on are money that you borrow. Now, I'm not against businesses borrowing money. There are situations where that's absolutely essential. If you're investing, if you're starting up, if you are diversifying into a new product area,

there's a risk there involved that you've got to invest and spend money now in order to generate those benefits into the future. So, borrowing the money may be a very sensible thing to do in itself. You may effectively use your own funds, introduce that into the business. You may have items that you don't actually need anymore in your business, which you may wish to sell, but fundamentally, the core of that cash should come from your customers.

Customers are the ones who are going to be paying your bills, hopefully giving you enough over the bills so you can keep that as a surplus. What do you need to do? Well, one thing you need to do is to connect closely with those numbers that are flowing through, and as a little tip that I'm going to share with you

now, is get more acquainted with looking at your company's or your business bank accounts. Now, you might think, well, I do that all the time, Mahmood, I look at the balance. Well, what I'm thinking is drill a little bit deeper and actually have a look at the statements that are generated. Now, some people that I meet, they're very wary of actually connecting to their bank statements.

Having looked at them, they might get quite scary, quite wary. They're going to think, oh my God, this is going to be so depressing. But you look at your bank statement, have a look at the items going in and out of that bank account. Now, the reason for doing that is because if you are familiar and you are comfortable with the money that's going out,

then you might be asking yourself, okay, what is, are those items going out of my bank account? What am I paying? And then you can have that conversation with yourself or your partners to think, are those costs necessary? Are those investments necessary? You can challenge them and become more familiar with what's going on?

There will be items that you can't avoid. There will be items that are essential for the future prosperity of your business. So, you might be buying equipment. You might be paying off a loan. You might be paying out for staff and freelancers. You may be paying out for a whole variety of things, and the whole purpose of that is to generate future business for yourself.

So, it's not saying get rid of it, but actually is there a business case? Does it add anything to your business bottom line, and your business prosperity, and the ability of your business to reach further? Have a look at the last two or three months here and you'll probably see a regular pattern of items that go out.

Now, whether what you do with that, you need to actually understand what those payments are. You need to have a look at them and you mustn't be wary of them because they will be commitments that you have all the time. The other thing that I will share with you is remember when you look at your bank balances, there are occasions when they may look very healthy.

Fantastic. Thumbs up from me in virtual space. However, ask yourself of that money that's built up, how much of it is yours? So, are you collecting money to pay over to other people? So, if you employ staff, you're going to have PAYE. If you've got a lot of cash that you've received already, brilliant. Then obviously what that means is that you might have to pay some of that out later on to actually for bills that you haven't yet come through the system.

Things like suppliers, freelancers, and the like. So, get a handle on what belongs to you. Now, in next week's podcast, I'm going to be talking about how you get people to pay on time. So, focusing on that ability to actually get those customers to actually part with their cash more promptly. Okay, we’re going to wrap the show up here.

I hope you've liked that. Let me just summarise some key things from this podcast. Number one, cash is the lifeblood of your business. It's the fuel that goes into your business car, and obviously the business car is your business. If you don't have cash cycling through, if you're burning cash at a rate of knots, if you are consuming, gobbling up cash, and having keep an eye on it, however brilliant your idea is, however innovative you are, however wonderful you think it is, it's not going to continue,

and you have to do something else. Secondly, don't be scared of what's going on with the cash. If you are aware what that cash in and out is, then you can do things about that. There are tactics we can adopt. There are tips that we can share to actually say, if I know I've got a cash problem coming up, what can I do to solve that?

And there's lots of things you can do, but you need to start connecting more so of the ins and outs. My name is Mahmood. I hope you've enjoyed this podcast. If you've liked the podcast, which I hope you do, then please give it a thumbs up. Share it with your friends, families, and acquaintances. Check out the podcast notes.

The show notes, I think they're called in posh terms. Faith in that. Have a great week everybody. Love and peace. Ciao. 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.