Mastering cash flow: Essential tips to build financial stability
In business, understanding cash flow is crucial. We spoke with Wayne Morris, CEO of Fifo Capital, to learn why it matters and how to make it work for your business.
In business, understanding cash flow is crucial. We spoke with Wayne Morris, CEO of Fifo Capital, to learn why it matters and how to make it work for your business.
Know Your Numbers: Understanding your cash flow is the first step. Morris emphasises, “Too many businesses look at their profit and loss (P&L) and think they’re doing great and kind of miss the true difference with that and cash flow.” Without this understanding, a business can easily run into trouble.
Plan Ahead: Planning and forecasting are vital. Morris points out, “Without understanding your cash flow, I think a business could come unstuck quite easily.” Anticipating cash flow fluctuations helps you make informed decisions and avoid surprises.
Identify Cash Flow Issues: Look for anything that could disrupt your cash flow, such as delayed payments or unnecessary spending. Morris notes, “”I believe a major problem lies in how many businesses handle its accounts receivable, which directly affects its cash flow. This aspect plays a crucial role in driving overall financial stability.”
Optimise Payments: Streamline your accounts receivable and payable processes. Morris suggests, “If you’ve got five bank accounts, for example, bring it down to one. Do you really need five?” Simplifying can give you a clearer picture of your cash flow.
Use Technology: Take advantage of cash flow management software. Morris believes, “The advancements in technology have really helped businesses understand their cash flow position.” Tools like these make tracking and managing your finances much easier.
Evaluate Investments: Carefully consider how each investment will affect your cash flow and profitability. Morris advises, “I think often what I’ve found is, you know, you can be cash positive and you can have a really good balance sheet, but if your profit and loss is impacted because you’ve bought the Ute outright, then all of a sudden, your profitability goes down.”
Focus on Strategy: Don’t get lost in day-to-day operations. Morris stresses, “So it’s about really just taking a step back from the day to day.” Set aside time for strategic planning to ensure long-term stability.
Seek Professional Help: When facing complex financial challenges, don’t hesitate to seek expert advice. Morris believes, “That’s where businesses could make a real difference.” Professionals can offer tailored solutions to help you overcome cash flow hurdles.
By following these actionable tips, you can master your cash flow and build a solid foundation for financial stability in your business.
Set Your Business Up for Success
For better cash flow management, reach out to Fifo Capital. Fifo are experts in helping SMEs do more, win more, and grow more. Discover how Fifo can boost your business with a tailored financial plan using your existing resources.
Read now: Why cash matters more than profit in your business
