Cashflow advice

Been There, Done That? is a series from award winning business journalist Rachel Bridge, exploring the most important things you may – or may not – have considered for your business. In this piece, Rachel tackles the perennially unpopular, and often misunderstood, issue of managing cash flow.

How much money enters - and then leaves - your business every week? Forgive us if we’re stating the obvious – but you really need to know these numbers.

But if the very thought of cash flow makes you want to plug your ears and cover your eyes, you’re not alone. But then the good news is that you already know the truth; it’s the lifeblood of your business. And just to hammer that home, research shows again and again that small more business failures are due to poor cash flow than anything else. Just try a Google search.

So, are you paying it enough attention?

Professor Costas Andriopoulos is Professor of Innovation and Entrepreneurship at Cass Business School. He says: “Smaller businesses typically focus a lot on their product and their customers, without thinking about how much money they’re burning. As a result, many of them run out of cash. Managing cashflow requires discipline but is vital.”

It’s simply the amount of money that’s being transferred in and out of a business, and – crucially – the rate at which that’s happening.

At any given moment, your cashflow is a snapshot of your financial position, and ultimately determines whether you’ll have enough money available.

Cashflow is different from revenue (the amount of money coming in). It’s the rate of which money is coming in, minus the rate at which its going out.

A lot of time can pass between i) when the goods are supplied and ii) the payment due date. Business customers might pay 30, 60 or even 90 days after receiving goods – and that’s assuming they pay on time.

So managing cashflow is an active thing you should probably be doing. Here are some starters:

Kiryl Chykeyuk is the founder of Kino-mo (www.kino-mo.com), which makes 3D holographic projectors. He and his team won the Start-Up category in #VOOM 2015.

He says:

“This is when it’s important to know your numbers – what you pay and when. Then, once you’ve set up a supply chain, you move to shipping the product to your customers. This is when you have to plan everything carefully in advance – literally everything – to manage your cashflow. You need to know all the terms on which you deal with your factory and your customers, and you need to know how much money you’ve got today. It’s not just about one spreadsheet – it’s about multiple spreadsheets. You’ve got to understand what’s going on.”

We’re expecting great things from Kino-mo. Not just because they’ve got some fabulous holo-tech. But also because Kiryl’s all over his cashflow.

Those multiple spreadsheets, which means he knows his numbers, are undoubtedly to helping Kino-mo #VOOM.