Cash Flow Management for Holly Springs Businesses

Why is Cash Flow Important?cash flow management for apex business

Knowing your cash flow will allow your company to estimate the total amount of cash at hand, while also providing projections of potential changes in cash to evaluate what amount will be available at any given time.

Monitor Your Holly Springs Business’s Cash Flow

Monitoring your cash flow is essential for the success of small to mid-size businesses. Being consistently aware of your company’s cash flow will help with wise investments and helps to prevent the need to borrow funds. It is always important to analyze where your money is going, so that you can seize control of your financial standing.

  • Positive Flow – Cash coming in
  • Negative Flow – Expenditures
  • Profit vs Cash Flow

Cash flow is NOT the same as profit.

Profit is concerned with income, expenses and tax calculations. Cash flow is concerned with the daily movement of cash moving to and from the business. It also provides insight on the trends of money movement.

  • When is the money coming in/going out
  • Where is the money coming from or going to
  • Why is there an influx or reduction in cash flow

Accurate cash flow will help your business when requesting loans, with credit approval, and with techniques to speed up cash payments/collection. Your business will avoid cash related crisis in the short and long term.

Improve the Cash Flow for Your Holly Springs Business

Examine these areas to increase flow:

  • Accounts receivable – sales payments that have not been collected. Delayed payments will reduce the business’s cash flow.
  • Credit Terms – time limits for clients to pay for purchases. Bills paid slowly decrease the flow of cash.
  • Inventory – excessive inventory takes up cash that could be allocated elsewhere. Don’t overdo it. Keep only what you can sell.
  • Accounts Payable – amounts owed to suppliers. Too much owed increases the negative cash flow of a Holly Springs small business.

Long Term Success Requires Good Cash Flow Management

An important factor that your Holly Springs small businesses should account for are peaks and valleys in cash flow. Properly managing your cash flow helps to prevent periods with limited cash availability. Looking deeper into financial analysis will find the potential reasons or times the company may experience a reduced cash flow, such as seasonal patterns, weather conditions, etc. It is important to recognize problematic expenditures to plan, recognize and account for problems and repair them.

Gaps in the Annual Cash Flow

Intentional Gaps – Purposefully reduced cash flow can result from purchases of inventory, expansion of the business (funds for construction/renovation, taxes, permits, etc.), taking advantage of unexpected business opportunities/sales/discounts.

Unavoidable Gaps – Contractors, tourist boutiques, hotels, etc. commonly experience unavoidable gaps in the business cash flow. Seasonal trends, logistical availability and many other factors contribute to an unavoidable flow. Businesses often see a major spike in peak season, and a lull in off season. Proper cash flow management can help your business “float” until the next peak flow period.

Unforeseen Gaps – Natural disasters, poor supply from wholesalers, and bad cash management can lead to an unplanned decrease in a company’s cash flow.

8 Tips for Controlling the Cash Flow of Your Holly Springs Business

  1. Know your current cash balance
  2. What is your future balance projection? Project your future cash flows by reviewing history & financial data.
  3. Know where your break even point is
  4. Do not focus on Profit when implementing a cash flow management system
  5. Keep cash on hand. Cash reserves can help prevent stressful situations when business is slow.
  6. Get customer payments quickly. Reduce your businesses negative cash flow.
  7. Monitor your cash flow threshold. Set a minimum limit to be aware of potential shortcomings.
  8. Track your cash every month to properly manage cash flow to meet needs. This will help prepare the business to make good business decisions.

Contact an Experienced Holly Springs Cash Flow Management CPA

At C.E. Thorn, CPA, PLLC, our small business accounting team will help you budget your business’ spendings by focusing on income and helping to decrease your tax payment. We can help you develop a more beneficial cash flow strategy by reviewing your current strategy and revising as needed.

You can speak with our experienced CPAs for Holly Springs businesses by calling 919-420-0092 or completing the online contact form today.


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