MGT Accounting

How accountants help municipalities avoid financial distress

Does Cash Flow Management Matter?

Exceptional cash flow management is an essential part of growing a business. It doesn’t matter whether your company sells more products and services each month. If you don’t manage your cash efficiently, your business will not likely succeed. 

This article explains cash flow and highlights some benefits of outsourcing cash flow management, which brings us to the following crucial question: 

What is Cash Flow?

The simplest way to define cash flow is the net amount of cash and cash equivalents your business receives every time customers purchase your products and when you pay vendors and creditors. In accounting, we call these cash inflows and outflows. 

Your company’s ability to maximise profit depends on its ability to generate positive cash flows, or at least long-term free cash flow. Let’s explain the two types of cash flows: 

  • Cash Inflow: This is your business’s revenue or income during its financial year. For instance, your business generates cash inflows when you sell your services or products. In this instance, you will invoice your customers, and they will pay you a certain amount. But sometimes they may pay you three months later. So in that situation, you will likely have what we call “cash flow problems.”  
  • Cash Outflow:  On the other hand, all your total expenditures during a financial year are your cash outflows—for instance, salaries, interest on loans, etc. 

So what are the benefits of outsourcing cash flow management? Let’s examine three key benefits of outsourcing cash flow management to MGT. 

1. REDUCE OVERSPENDING

If there is no effective cash flow management plan in place, it will be nearly impossible to know how much you will need to keep your business running. You’re also likely to overspend if you don’t know how much you will need to operate a business. But outsourcing to us guarantees you sufficient cash reserves to cover unforeseen expenses. 

 2. SCALE YOUR BUSINESS

Rebuilding a business post Covid requires that you manage your cash flow well. With a cash flow management plan, growing your business becomes easier. It prevents you from running out of money and enables you to invest in any business opportunities that will help you scale faster. 

3. DETERMINE LIQUIDITY 

Outsourcing cash flow statements enables business owners to determine their companies’ liquidity and profitability. An accountant can monitor trends in your profit and loss accounts and develop liquidity means to help you settle your long-term loans faster. 

They will also identify the cash deficit before your payments are due so you can raise the required funds through external sources like loans. Besides, efficient cash flow management can be your competitive advantage over competitors who neglect to manage their cash flow.

Get your financial control and foresight today!

MGT delivers a seamless cash flow management service for all businesses, regardless of industry or size. Our accountants will track how much money is coming into and out of your business and devise a strategic plan for managing your cash flow. Reach out to us today by emailing info@mgt-accounting.co.za