Protecting Your Business' Cashflow

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It's easy to get caught up in the day-to-day operations of running a business. However, it's important to remember that other things also need to be taken care of. One of these things is the protection of your business' cash flow.

In today's world, cash flow is king. With the economy, the market, and the competition in such a constant state of flux, it's critical that you protect your business' cash flow. You must understand how the economy works, what the market is doing, and how you can protect your company's cash flow.

Protecting Your Business' Cashflow

The biggest challenge faced by small business owners is cash flow. In today's economy, many people are struggling to make ends meet. Small businesses are one of the fastest-growing sectors in America. They provide a source of employment for over 12 million people, contribute $1.4 trillion annually to the U.S. economy, and employ nearly half of all private-sector workers. However, small businesses have a unique set of challenges. One of those challenges is cash flow.

Small business owners don't have large sums of money readily available to cover their expenses. They are often forced to dip into their savings, borrow money, or sell assets to get by. While some small businesses have the luxury of taking out a loan or obtaining a credit card, many others can't afford to take the risk.

How Can Small Business Owners Keep Their Cash Flowing?

They need to understand the different types of cash flows that impact them, including current cash flow, future cash flow, and working capital. The current cash flow is cash coming in right now. Working capital is cash used to pay bills, buy inventory, and pay employees. Future cash flow is when money will come in in the future.

These different types of cash flows should be viewed by one another. For example, a business with negative working capital may not have enough cash to pay bills. They might be able to make ends meet for a while, but if they run out of money, they could struggle to stay afloat. On the other hand, a business with positive working capital is able to make payments on time and cover payroll, so they are in a better position to survive a downturn in the economy.

When it comes to managing cash flow, three things can help a business owner. The first is the ability to forecast cash needs. Knowing what they will need in the future will allow them to plan ahead and budget accordingly. It means they can make decisions about whether they need to pay a bill that month or whether they need to put off the payment until next month.

The second is the ability to generate cash. Businesses can make money by selling goods and services to customers. They can also make money by buying raw materials and selling them to other companies.

The third thing is to manage liquidity, which is the ability to convert an asset into cash quickly. Businesses can get cash by selling inventory, borrowing money, and selling assets.

What Are The Components Of Cash Flow Management?

Cash flow management (CFM) is one of the most important financial management tools which helps an organization generate positive cash flows. Cash flow management is a critical part of the business strategy and requires appropriate planning to ensure successful implementation.

CFM helps in reducing the impact of cyclical fluctuations and increases an organization's resilience. CFM helps in identifying the key drivers for positive cash flow and manages cash inflows and outflows throughout the year.

CFM is an essential process for managing cash inflows and outflows for an organization. This process provides a framework for the efficient use of resources, maximization of the benefits, and minimization of the risks.

Here are the key components of cash flow management:

Key Cash Flows:

Critical cash flows are those the organization requires for its operations, and they are either a standard requirement or a planned requirement. They include operating cash flow, interest payments, and taxes.

Operating Cash Flow:

Operating cash flow is the money required to fund the cost of the organization's day-to-day operations. The primary sources of operating cash flow are revenue, operating expenses, capital expenditure, taxes, and dividends. Operating cash flow should ideally be maintained at a level sufficient to cover operating expenses and a reserve for unexpected events.

Interest Payments:

The interest payable on debt is usually an operating expense. Interest paid on debt is generally classified as an operating expense. Interest payments may also be classified as a non-operating expense if the organization has been able to borrow funds to finance capital investment.


The tax liability is usually classified as a non-operating expense. Tax liability may also be classified as an operating expense if the organization has been able to borrow funds to finance capital investment.

Capital Expenditure:

Capital expenditure includes the purchase of assets and the improvement of existing assets. Capital expenditure is generally classified as an operating expense.


Dividend payments to shareholders are usually classified as an operating expense. Dividends paid to shareholders are generally classified as a non-operating expense.

Financial Instruments:

Financial instruments are legal agreements that allow the organization to raise funds and pay them back. Financial instruments can be classified as debt or equity securities, bonds, notes, debentures, and mortgages. These instruments are used to manage cash inflows and outflows.

Debt Securities:

Debt securities are financial instruments issued by an organization and used to raise funds. Debt securities include long-term debt, such as bank loans and long-term bonds, and short-term debt, such as short-term bank loans and short-term bonds.

Equity Securities:

Equity securities are financial instruments an organization uses to raise funds. Equity securities include shares, preferred stocks, warrants, options, and convertible bonds.

What Are The 10 Effective Ways To Protect Cash Flow?

When it comes to managing a business, one thing is sure – cash flow is king. And, if your cash flow is not protected, you're at risk of losing money or being unable to make payroll.

So, here are ten effective ways to protect cash flow, and you should start doing them now.

1. Put A Buffer In Place

Buffer is a simple way to manage cash flow fluctuations. So, if you have an ongoing, steady stream of payments coming into your business, then you can put a buffer in place to ensure that you don't run out of cash and have to shut down operations. Buffer is a service that allows you to create a safe space in which you can store any extra funds you receive until they become available.

2. Use A Financial Software

If you're looking for easy-to-use financial software, then look no further than QuickBooks Online. It's available on desktop and mobile platforms and is one of the most popular accounting solutions.

3. Hire A Bookkeeper

A good bookkeeper is essential for ensuring that all of the financial information is accurate and up-to-date. They will also keep a log of all of your transactions, including deposits, withdrawals, and payments.

4. Pay Yourself First

One of the biggest mistakes businesses make is to spend more than they earn. It means that cash flow is not protected. If you have an ongoing, steady stream of payments coming into your business, then you can put a buffer in place to ensure that you don't run out of cash and have to shut down operations.

5. Track Expenses

It's easy to lose track of expenses. That's why you should use a simple tool like Expensify. It will help you organize your expenses into categories so you can easily see what you spent money on.

6. Budget Regularly

Budgeting is critical for every business owner. In order to protect your cash flow, you need to plan your finances in advance. It will allow you to avoid overspending, preventing you from running out of cash and shutting down operations.

7. Monitor Spending

You can also use tools like Personal Capital to monitor your spending and see how much you spend each month. You need to change your budget if you start noticing that you're spending more than you're earning.

8. Save Your Profit

One of the best ways to protect cash flow is to save your profits. In other words, you should try to save as much money as possible.

If you save your profits, they can be used to pay off debts and pay off your employees. Keeping your earnings also helps you avoid having to borrow money.

Remember that they can take your company's assets if you don't pay your creditors. It can also put your company out of business if it continues to accumulate debt.

9. Be Aware Of Your Payables Cycle

Another essential part of a business is paying. Paying suppliers and contractors is also critical to your business. When you are running a business, you should make sure to pay your bills on time. If you do not pay them on time, you will have a problem later on.

You can use your accounts payable system to track when you are going to pay your bills. This system will help you pay on time.

10. Understand Your Customers' Needs

It is another essential thing to consider when you are running a business. You need to understand what your customers need. 
It means you need to know what your customers need and what they expect from you. You can learn about your customers by observing their behavior and knowing what they are looking for.

Tools For Protecting Business Cash Flow

If you run a business and you are planning to set up a system for monitoring your cash flow, then you must be thinking about what tools you can use for such a purpose. Well, there are some tools that can be used to monitor the cash flow of your business.

The most important thing to note here is that these tools will help you keep track of your cash flow so you can get to know your current situation and future outlook. These tools are called cash flow management tools. In this article, we will talk about some of the best cash flow management tools available out there.

In general, there are two types of cash flow management tools; one that comes with an application and another which does not. However, we have chosen a few tools which come with applications and are free of cost. We have selected only the best from among the rest. Here they are:

1: Xero

Xero is a cloud-based accounting software developed by Xero Ltd, a U.K.-based company. It is an excellent tool for small businesses, freelancers, startups, and others who do not want to spend a lot of money on their accounting needs. The software allows you to record, analyze and report your financial activities.

It is a simple, easy-to-use, and user-friendly application. The software helps you to manage all your accounts and transactions easily. Xero also allows you to generate reports for your business's financial information. This tool will help you to find out how much money you have received, spent, and left in your bank account.

2: Quickbooks Online

QuickBooks Online is an online accounting tool developed by Intuit. It allows you to record, analyze and report your financial activities easily. The application works in the online mode and provides complete access to your data through an internet connection. It is one of the most popular tools for small and medium businesses.

You can easily access your data through the app. There are many features provided by the app which help you to keep track of your cash flow. You can perform multiple actions using QuickBooks Online, such as entering receipts, bills, and payments, creating invoices, creating purchase orders, managing inventory, and creating reports.

3: Tally

Tally is a robust cash flow management tool that comes with an application. Tally also allows you to make payments, enter bills and expenses, and create reports. Tally is developed by the software company named NetSuite Inc., a U.S.-based company. It is a web-based application and can be accessed from anywhere around the world. It has many features that will allow you to manage your cash flow.

It is straightforward to use and can be accessed from any device. Tally gives you the flexibility to access your data from anywhere. You can view, update, modify, transfer and delete your data.

Final Thoughts

In conclusion, to protect your business from financial ruin, you need to know how to control your cash flow. It means that you need to have a plan to help you manage your money and expenses. You also need to have a budget in place to help you control your spending.