Cashflow cashflow cashflow – the lifeblood of a business

Everyone says it, many in business talk about it, and some even know what it’s all about! Cashflow is critical to the health of a business. In the same way that a person needs a regular income to pay their bills and put a roof over their head, a business needs the same regular income from their customers. Even the biggest businesses can fail if their supply of cash dries up – this is essentially what happened during the banking crisis; banks just couldn’t raise the capital to pay their debts and keep going.


By understanding what cash flow is about, and keeping up to date financial figures will ensure that your business stays healthy, profitable and able to exploit opportunities as they come along.


Cashflow can be recorded on a simple spreadsheet. There are many examples to choose from, but they all have the same underlying information:

1. Regular Outgoings (Overheads)

2. Variable Outgoings (e.g. cost of sales; wages, spares etc)

3. Income (customer payments due in, sales of assets etc)

4. A timeline (e.g. 3-6 months)


Regular Outgoings

These are things such as staff wages, rent, utility bills, loan and asset repayments etc. In fact, anything that is a regular bill that doesn’t fluctuate that much.

Variable Outgoings

These tend to fluctuate depending on how busy your company is. Seasonal fluctuations may mean that you employ more staff during the summer months, or buy increased stock in preparation for Christmas.


This should list your actual (invoiced) income stream, with the due dates for payment where applicable. This allows you to see where you should receive payments from customers and allow you to alter spend accordingly if for example you are not due many payments in a particular month. If you have a lean month due in terms of income, it makes sense to delay any spending to prevent possible cashflow problems.


Plotting the above Income and Outgoings along a suitable timeline, e.g. Week, Month or 3 months will give you an illustration of when in the future you may encounter cash-flow problems. This information means that you do not spend unnecessarily during these times, and instead wait for the cash position to become healthy.


By recording the outgoings and income of a company not only lets you understand the current health of your business, but also allows you to spot the best times for investment or growth opportunities without it risking your business. Remember, that if the cash runs out then the business will fail no matter how big the business.


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