Your Business

How managing your cash flow can see your business grow

Team Waddle  •  22 July, 2022

There's no doubt that recent years have delivered lumpy cash flow to numerous Aussie small businesses. Many small business owners struggle with cash flow from time to time; however, there are ways to smooth lumpy cash flow and use positive cash flow to grow your business.

Waddle is excited to show you how!

Understanding small business cash flow management

At any given time, money flows into and out of your business bank account. Good cash flow management is all about understanding the balance of the 'ins' and 'outs' within your bank accounts.

Positive cash flow

Positive cash flow means having more cash coming in than what's going out.

Negative cash flow

Negative cash flow is when the amount coming out of your accounts exceeds what's coming in.

Naturally, most businesses will fluctuate between positive and negative across the year, so managing cash flow doesn't necessarily mean trying to attain positive cash flow all the time, or simply getting more money in your accounts. Instead, managing cash flow means proactively managing your immediate cash position while planning around anticipated future fluctuations.

Using a cash flow statement

Savvy business owners rely on a cash flow statement to help them better understand and manage their business finances. Cash flow statements can not only clearly detail money coming in and out, but they also allow you to perform a cash flow analysis, which can identify - at a glance - any cash flow problems and then pinpoint when and where they occur. Payment cycles and seasonal trends are easily identified via these statements. In addition, they allow firms to plan ahead for business expenses and payment dates to ensure there is enough cash on hand.

You don't need to be a professional accountant to calculate cash flow. One of the most commonly used methods is the Free Cash Flow Formula. This formula is incredibly straightforward, as it essentially deducts your capital expenditure from your operating cash flow.

Business growth opportunities

For planning purposes, it's no secret that keeping a steady finger on the pulse of their cash flow allows businesses to have the best information when making key business decisions. Some of the expansion opportunities that buoyant cash flow enables include:

Attracting Investors

The encouraging benefit of having a good handle on how to manage cash flow is that it can help showcase your business performance to potential investors! Maintaining a healthy cash flow not only demonstrates the financial health of the company, but also reflects strongly on you, the business owner.

Keeping financing options open

Whether it's leasing equipment or looking or applying for a business loan, lenders are going to assess your financial state to identify if you're a profitable business with regular cash flow in order to meet your repayments, before hitting the 'approve' button. Cash flow issues could restrict your ability to access financing.

Realising business opportunities

More than just having enough money to cover basic operating expenses and office supplies, having a hold of your cash flow can actually translate to having more working capital. With additional cash coming in on the regular, you will be able to build up a cash reserve, such as in a business savings account, to raise funds for the instant you need them - like to make a big business idea come to life.

How much cash you have in your cash reserve will depend on your net income and the strength of your business model.

Did you know Waddle can help to keep your money moving? Waddle's innovative invoice finance solution allows you to tap into your outstanding invoices without having to wait for the full extent of your industry's payment terms. Your business needs money straight away, not in 90 days when your customers pay up, let alone if they make late payments!

Invoice financing can give your business the breathing space it needs to not only pay vendors and other expenses immediately, but it can provide the opportunity to increase profitability and cash flow. Waddle can connect with your quality accounting software to make managing cash flow even simpler.

Unlock your invoices and hand yourself the keys to business growth by getting in touch with the Waddle team.

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