Why Cash Flow is Important
Cash flow management, in a nutshell, is money in and money out of the business. Cash flow is usually tracked weekly, monthly or quarterly depending on the business and it can be either be:
Positive: where the incoming cash is higher than the outflow of cash. i.e., your sales and accounts receivables are greater than your expenses and accounts payables.
Negative: Where the opposite is true, the expenses and accounts payables are higher than the sales and accounts receivables.
The concept of cash flow is simple.Managing cash flow however, is an entirely different ball game and something which even the most skilled of finance professionals can struggle with when the right tools are not at their disposal.
It’s a well known fact that a majority of businesses fail in their first 10 years, with incorrect cash flow management being a major contributing factor in many cases. Perhaps you’ve heard of the statistic that more than half of companies that fail were profitable but exhausted their cash. While there has not been a conclusive study in the area, it is true that cash flow management can lead to the demise of any company as mentioned by Adams (2017) in Entrepreneur, “when expenses spiral out of control,…it’s impossible for a company to survive.” With poor cash flow management, the best-case scenario is the inability to grow, and worst-case scenario will run you out of business.
Knowledge is Power
Most companies know exactly how much revenue comes in but have no clue how much goes out until the end of each month. There is a disproportionate emphasis put on the incoming cash of a company. As the classic saying goes, “It’s not the big incomes – but the small expenses – that make you rich”.
To get your cash flow management in order, here are a few tips to ensure that your business will not be in risk of extensive negative cash flow:
Eliminate Out-of-Policy Expenses
Using a manual expense management system makes it impossible to fully limit an employee’s spending. They may make a purchase that is not within the policy and you, as a company, will have the headache at the end of the month of either paying off an unauthorized expense or seek compensation from the employee that may result in a disgruntled staff member.
With Qashio’s Custom Limits and Controls it is easy to limit an employee’s expenses to specific categories or vendors selected by you. Is your employee going on a work trip? Limit the card to relevant categories such as taxis, hotels and food & beverage to proactively prevent any out-of-policy expenses. No surprise expenses at the end of the month means you can plan your cash flow more accurately.
Limit the Risk of Fraud
With a traditional corporate card or reimbursement strategy there is very little you can realistically do to stop any fraudulent or suspicious activity until it is too late.
Qashio has put measures in place to recognise fraudulent activities and alert the business if our system notices any suspicious activities. In addition to the preset spend controls which can prevent misuse, we provide companies with their own controls by allowing both cardholders and admin to suspend cards in the event of any suspicious activity. Since transactions are directly recorded in our system, we ensure that no duplicate receipts or falsified expenses can be submitted for reimbursement.
Get Real Time Visibility of Transactions
When a business utilizes a traditional expense management strategy it is hard to visualize and note transactions in real time. Managing spending becomes a headache and it is exceedingly difficult to strategize and plan your cash flow until the end of the month, where you do not know if any nasty surprises are looming.
With Qashio’s dashboard you can easily see, control, and limit your expenses in real time. There is no daily headache and no surprises, you can easily control your spend before it happens and view the transaction data directly. Should you need capital elsewhere, you can instantly limit your expenditure to ensure that you will not go above your approved spending. Should an employee need some more funds, you can review their allocated funds, control their approved categories and with ease of mind allow them to do what they do best.
Ensure Proper Coverage of Debt
As a business manager, you need to put your capital to proper use. Even when you’ve found the working capital needed to operate, without a control system set up you may experience unexpected expenses at the end of the month that disrupts your capital and complicates payroll and your accounts payables.
Qashio’s solution allows you to control your outgoings and removes the worry of unforeseen expenses, with our smart category-controlled cards you can control your budget, limit your expenditure, set policies, and automate your expense management to establish and anchor a strong cash flow, without any surprises.
As a growing business, planning for a strong, continuous positive cash flow may be the most important factor to reduce the risk in your business and allow for uninterrupted growth.
Reach out to one of our specialists today and learn how your company can reduce expenses and solidify your cash flow!