Cash flow

What it means

Cash flow is the money actually moving in and out of your business. It is about when cash arrives and leaves, not what your books say you earned.

A business can show a profit on paper and still have no money in the bank. This happens when customers pay late, stock sits unsold, or large bills fall due before sales are collected. Profit is an opinion on a statement. Cash is what pays salaries, rent and suppliers on the due date.

Why it matters

Businesses rarely fail because they stop making sales. They fail because they cannot pay what is due when it is due. Knowing your cash position weeks ahead gives you time to act: chase collections, delay a purchase, or arrange funding calmly instead of in panic.

• You pay salaries and suppliers on time without stress.
• You see a shortage coming and fix it early.
• You can take growth decisions knowing the cash will be there.

How to use it

1. List all cash you expect to receive in the next 8 weeks, with the date each customer is likely to actually pay.
2. List all cash going out in the same weeks: salaries, rent, GST, supplier bills, loan payments.
3. Subtract week by week to see the balance at the end of each week.
4. Mark any week where the balance goes low or negative. Plan one action for each, such as an early invoice or a follow-up call.

Common mistakes

• Treating profit as if it were money in the bank.
• Counting an invoice as cash on the day it is raised.
• Forgetting taxes and loan instalments that fall on fixed dates.
• Planning only for the current month.

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