No one starts a business with the intention of seeing it fail. Everyone wants to see their business thrive, make a profit and GROW into something impactful. Yet more often than not we still see entrepreneurs failing – despite their fantastic ideas, impressive business models and bucket loads of passion. There are many reasons for this, but the one that keeps coming up is cash flow.
According to a study conducted in the US, 82% of businesses that fail call it quits because of cash flow problems. South Africa sees the same problems as the 2016 NSBC survey found that insufficient cash flow was the biggest obstacle small businesses faced when trying to grow their businesses.
What is cash flow?
The money that moves or “flows” in and out of a business in a given month. Not to be confused with profit. You may have earned a profit, but if you haven’t been paid or received the money yet you may not have a positive cash flow.
Being in control of your cash flow ultimately gives you more control over your business. Not only can you pay your staff and suppliers on time, but you can make better decisions a lot faster and with more confidence. Added to that, a strong positive cash flow means you don’t need to lend money from the bank, and you can steadily grow your business without taking on more risk.
We’ve built a handy cash flow template that you can use to see how your cash flow changes over time. As we move into winter, it’s even more important to plan for slow months in advance and ensure you have a bird’s eye view of the health of your business.
How the cash flow tool works
To get started, all you need is 1) access to your Yoco Business Portal, and 2) a good idea of your monthly expenses. If you are not using Yoco yet, you can still use this cash flow template. It will simply take a bit more time to collect your sales information.
Open up the demo cash flow spreadsheet in Google Sheets.
Make a copy of the demo template and save it to your Google Drive. You can also download a copy as an Excel document if you prefer to work in Excel. Make sure you delete all the example numbers (income and expenses) before you start. Note that you do not have to delete the numbers in the blue and green rows. These amounts are automatically calculated when you input your income and expenses.
Now log into your Yoco Business Portal to get your income data.
3.1 Cash Sales:
Go to your sales page. Select the month you want. Copy the cash amount.
3.2 Card payouts
To get the total income received from card payments in a given month you have to go to the “settlements’ tab (not the reports tab). This is because it can take up to 2 days for the money to be deposited into your account. You need to record the exact amount of cash received in a given month in order to calculate cash flow.
Once in the ‘Settlements’ tab select the month you want to look at. Click on ‘Export’ to download an excel file with your payouts.
Open up the exported sheet. Sum up the numbers in the ‘Amounts’ column.
You can now add the amounts for Cash and Card received into your cash flow document.
Add in the rest of the numbers. Any other income and all of the payments you made that month. You can customise everything to suit your business.
The template will automatically calculate the subtotals totals and the main totals for you. You will even get a view of your cash flow over time by looking at the graph in the third tab. Keeping a view like this will benefit you in the short-term as well as in the long term. Imagine going into winter in June 2018 and knowing what to expect from your cash flow because you have the record from June 2017.
Tips on keeping a healthy cash flow
- Negotiate payment terms with your suppliers. If you know when you run out of cash every month, ask your suppliers to shift invoice dates to the middle of the month, or provide you with a payment window of a few weeks.
- Set aside time every week to follow up on unpaid bills. Even great customers will start buying less if they know they have a big bill to pay.
- Avoid EFT payments where possible by accepting card payments.
- Forecast your sales and expenses and see how your actual sales and expenses compare.
- Decide on a Rand value that acts as a warning sign. If it goes below this, you know you need to take immediate action to avoid running out of money. Similarly, if your cash flow goes above a certain value, invest the cash in a flexible fixed deposit account.
For more advice on getting your new businesses finances on track read “Take control of your small business finances: A checklist for the new entrepreneur“.