Why Your Business Feels Broke, Even with Money Flowing In

You have sales. You have money coming in to your account. However, your bank account is screaming at you to keep working, since its looking a little …bleak. And then the million dollar question pops into your head where did it all go?

If this sounds familiar, you aren’t alone, and you aren’t doing anything wrong. This is one of the most common situations new business owners can find themselves in, but also one of the most stressful, until you understand why this is occurring.

It all comes down to the difference between cash and cashflow. They sound like they could be interchangeable, but they aren’t.

Cash refers to the amount of money a business has in its accounts, minus any amount owing on say credit cards, at a specific point in time. Cash is a snapshot in time and is used to measure liquidity.

Cashflow refers to the net movement of money in versus money out of the business, over a specific period. Cashflow shows the speed of your money movement, and is used to measure operational sustainability.

Let me paint a picture for you. Your business made $100 today. You are also waiting for $50 from another customer, that has yet to be paid. Cash wise, you have $100. However, on your cashflow statement, you actually have $150.

Why does this occur? It’s all about timing. Clients can take time to pay you for your services, even after you have completed your part of the deal. You may also be delaying paying an invoice to a supplier until closer to the due date. The important thing to remember is that what you see in your bank account may not always be the true number of what you have to spend. You may have more coming your way, but you may also have access to less money than you believe.

Keeping an eye on both cash and cashflow is critical in the beginning of a new small business. It does not need to be complicated, but a spreadsheet with all your business’ money ins and outs can help you spot patterns, prepare for big expenses, and keep the “broke” feeling from becoming your go-to personality trait. Feel free to use our free cashflow template to create your own.

Need help creating a cashflow for your business? Let’s talk! Book a free 30-minute clarity call today www.korporateconsultingservices.com.