Do You Understand Your Cash Flow?
Most business owners look at revenue & profit, is that the answer? Or do you need to be a bit cuter than that?
𝗪𝗶𝘁𝗵𝗼𝘂𝘁 𝗮 𝗽𝗹𝗮𝗻 𝘁𝗼 𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗲, 𝗮𝗹𝗹𝗼𝗰𝗮𝘁𝗲 𝗮𝗻𝗱 𝗶𝗻𝘃𝗲𝘀𝘁 𝗰𝗮𝘀𝗵, 𝘆𝗼𝘂 𝗿𝗶𝘀𝗸:
- Chasing revenue instead of high-ROI investments
- Wasting capital on low-impact initiatives
- Carrying debt that weakens financial flexibility
- Failing to attract the right capital at the right time
Missing opportunities to scale sustainably
1. Operating Activities = The Business’s Engine
This is the heartbeat of your business—where cash is created or destroyed in daily operations.
𝗪𝗵𝗲𝗿𝗲 𝗰𝗮𝘀𝗵 𝗰𝗼𝗺𝗲𝘀 𝗳𝗿𝗼𝗺:
- Sales collected in cash
- Payments received from Debtors
- Interest & dividends received
𝗪𝗵𝗲𝗿𝗲 𝗰𝗮𝘀𝗵 𝗴𝗼𝗲𝘀: - Payments to suppliers & employees
- Interest on debt
- Taxes
𝗛𝗼𝘄 𝘁𝗼 𝗺𝗮𝘀𝘁𝗲𝗿 𝗶𝘁: - Optimise your cash conversion cycle.
Use sensitivity analysis to stress-test your plans.
2. Investing Activities = The Car’s Body
This is where strategy meets execution—how you deploy cash to drive enterprise value, the assets that create value to take you on your journey.
𝗪𝗵𝗲𝗿𝗲 𝗰𝗮𝘀𝗵 𝗰𝗼𝗺𝗲𝘀 𝗳𝗿𝗼𝗺:
- Selling equipment or investments
- Loan repayments from others
𝗪𝗵𝗲𝗿𝗲 𝗰𝗮𝘀𝗵 𝗴𝗼𝗲𝘀: - Buying property, equipment or investments
- Lending cash to others
𝗛𝗼𝘄 𝘁𝗼 𝗺𝗮𝘀𝘁𝗲𝗿 𝗶𝘁: - Prioritise investments using NPV & IRR.
- Align investments with sustainable operating cash flow growth
3. Financing Activities = The Capital Structure
This determines how you fund your expansion—through debt or equity, getting the money to buy the car that will take you on your business’s journey.
𝗪𝗵𝗲𝗿𝗲 𝗰𝗮𝘀𝗵 𝗰𝗼𝗺𝗲𝘀 𝗳𝗿𝗼𝗺:
- Using or selling shares
- Taking on new debt
𝗪𝗵𝗲𝗿𝗲 𝗰𝗮𝘀𝗵 𝗴𝗼𝗲𝘀: - Paying dividends
- Buying back shares
- Paying off debt
𝗛𝗼𝘄 𝘁𝗼 𝗺𝗮𝘀𝘁𝗲𝗿 𝗶𝘁: - Optimise your capital structure.
- Align dividend & share repurchase policies.
𝗧𝗵𝗲 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆:
Don’t just focus on profit; real financial intelligence includes a strong funding & cash flow strategy.
The businesses that win aren’t just profitable; they use their cash to maximise their income & business value. They know how to fund the journey. If cash is the fuel your car needs, funding is the money to buy the car and pay for the petrol.
If this resonates with you or you find it interesting, why not book a meeting to see what else we can do to help you?
