Guide

Cashflow management

How to measure and improve your cashflow

Ideally, you will have more money flowing into the business than out. This will allow you to build up cash balances to deal with short-term costs - such as bills or expenses - as well as funding growth and reassuring lenders and investors about the health of your business.

However, income and expenditure cashflows rarely occur together - cash inflows often lag behind, so it is important to maintain enough cash in your business to deal with day-to-day running costs. Your aim should be to speed up the inflows and slow down the outflows wherever possible.

Cash inflows include:

  • payment for goods or services from your customers
  • receipt of a bank loan or increased loans or overdrafts
  • interest on savings and investments
  • shareholder investments

Cash outflows include:

  • purchase of stock, raw materials or tools
  • wages, rents and daily operating expenses
  • purchase of fixed assets - PCs, machinery, office furniture, etc.
  • loan repayments
  • dividend payments
  • Income tax, Corporation Tax, VAT, National Insurance contributions, etc

Many of your regular cash outflows will need to be made on fixed dates. So you must always be in a position to meet these payments in order to avoid large fines or a disgruntled workforce.

Improving your cashflow

To improve everyday cashflow you could:

You can also improve your cashflow by borrowing money, or investing more money into the business. This can help you cope with short-term cash problems or fund short-term growth, but it is important not to rely on these in your cash strategy.

For more information see Invest NI’s tutorial on maintaining a positive cash flow - it will outline actions you can take to manage your cash effectively and provide you with key tips to keep your business financially sound.

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