Back February 17, 2021

Facing Change with Cash Flow Control

Changes are normal and healthy for businesses. It’s an indicator of evolution and growth even if they’re scary. Sometimes changes are inevitable and what matters the most in those cases is the level of preparedness and adaptability you and your company show. 

Where does cash flow come in?

Cash flow comes in long before change even happens. It is both a signal that predicts the need to pivot at a certain point and a leverage when the business needs to adapt fast to new conditions. In both situations, a properly updated cash flow plan can help you to save your business and to sleep better at night.

Always carefully monitor and plan your next cash flow movements in order to be prepared for what’s coming next.

Ok, but how do you know that you have to change something?

The entrepreneurial instinct might have saved you once, but most of the time data beats gut feeling. Therefore, our advice is to base your business decisions on clear financial data. 

Set up and periodically check your cash flow in order to spot the problems early and to take informed decisions on time to save your business. Some of the problems that you might find include:

  • Poor inventory management

  • Constant delays in cash collections

  • Unmonitored payments

  • Seasonality

  • Accelerated growth

  • Turnover decrease

  • Profit margin decrease

  • Other specific problems about your business

No matter the reason for which you feel the need of a change, try not to take decisions based on impulse, but on your data. Check your last year’s numbers, compare it with your current performance, set up new goals for the next period and track it on a monthly basis in order to know where you’re standing.

How do you prepare for change?

You’ll find a lot of articles about cash flow forecasting on our blog. And this is also what we do at ThinkOut – cash flow analysis and forecasting for entrepreneurs. Why? Because even though predictions are not always 100% accurate, they offer you a perspective about the future of your company. And you know what to expect from tomorrow.

By constantly tracking and adjusting your forecasts based on your actual money movements, you can increase the level of precision high enough to have the confidence and certainty you need to run your business.

This will also come in handy when trying to take the best decision for your company. A lot of ideas and no clue on what to choose? Check first what impact each of it has on your business financials, build cash flow scenarios and pick the best solution for your case.

Of course there will still be crises and unpredictable problems, but do not give up on financial planification just because something bad can happen anyway. The more predictable your company’s future, the more prepared you’ll be to keep it afloat.

No matter how important or big the change you’re planning to have, put it on paper. Check your current balances, your fixed monthly costs and calculate how much time you can afford those. Add, edit and play with your costs until you reach your maximum spending limit that will still keep your company above the line. 

If you identify cash flow problems, as in negative cash flow, see if you can rely on any cash surpluses or you need to prepare for a new funding option.

Also, try to always have a buffer for unpredictable situations.

Who handles cash flow?

Even though cash flow management is naturally perceived as a top management task, when shifting to something new, this preoccupation needs to become even more obvious and act as a guideline for the entire team. 

What is more, by doing this each member will see his own team’s contribution to cash flow so the natural resistance to change decreases and the overall shift happens smoothly.

Why is communication important?

You shouldn’t forget to always communicate about the change process to all stakeholders. It is one of the main conditions for any transition to succeed. 

Share the plans with your team, prepare them, show them your financials and make sure that everyone is on the same boat before taking the first step to change.

It is true that you can never be too prepared for the unexpected, but you should not ignore the “what if” and take measures while you can. Of course, no solution can be everything to everyone, but in this case, there are some simple steps that make a huge difference – such as cash flow control and forecasting. 

And don’t forget that you have ThinkOut to help you with this. Automatically import your daily bank transactions, organise all your inflows and outflows, monitor your cash flow and set up your goals. Understand how money moves your business with ThinkOut!

Enjoyed this article? Keep on reading about why is cash flow forecasting important or how to do it for your business.

Author: Bianca Antohe