Cash Flow Management: Importance & Company Protection From Future Cash Flow

Cash flow management is a process using which a corporation manages control over the cash outflow and inflow. The main aim is to make sure that the inflow of funds is more than the outflow so that the corporation stays surplus.

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cash flow management

Overview: Cash Flow Management

When we think of financial management in a business, it’s usually believed that cash is the real deal. Knowing how to crack cash flow management in a business is extremely important, whether your business is booming or struggling. As per facts, more than 60% of profitable corporations, suddenly run out of funds. If a corporation utilizes most of its working capital without planned management it can face cash-related troubles, refraining from paying income to workers, suppliers, or even from purchasing materials.

Usually, there’s always a lag in paying the dealers as the main problem lies in taking cash from the clients and the only solution is cash flow management. Therefore, it’s important to keep up a standard of working capital that lets you stay away from cash troubles and also assists in running the business. Maintaining the cash flow prevents cash outlays for a long period while also encouraging clients to make payments side by side.

What is Cash Flow Management?

Cash flow management is a process using which a corporation manages control over the cash outflow and inflow. The main aim of the management of cash flow is to make sure that the inflow of funds is more than the outflow so that the corporation stays surplus. It also serves as an alternate function for making sure that the extra funds are used or maintained intelligently to generate good returns on the blocked capital. Cash is the backbone of all businesses. If a business starts losing cash, all its activities will be put on a halt.

The main goal of the management of cash flow is to ensure that corporation doesn’t go through any kind of cash shortage. No firm should overdue payments to its suppliers. In a similar way, it also shouldn’t keep any outstanding debtors on its record. These cases indicate poor cash flow management.

But we must clarify that cash flow isn’t like profits. Corporations could be having positive cash flow but still be facing losses. The idea of cash flow management is to act as a tool that links payments to banks or vendors and receipts from clients. It handles receipts and payments in a way that the vendor’s payment is feasible as per the credit terms and also after the completion of the client’s payment cycle.

Classification of Cash Flows

There are many areas of an organization where cash can come from and go through, including:

  • Operating Cash Flows: The term “operating cash flow” refers to cash flows from routine business activities like goods manufacture and sales. This figure tells whether a business has sufficient revenue coming in to cover its expenses and operating costs. 
  • Investing Cash Flows (CFI): The term “investing cash flow” (CFI) refers to the amount of money that has been made or spent on investments during a given period of time.
  • Cash Flows from Financing (CFF): The financing cash flow (CFF) shows the net cash flows utilized to finance the company’s operations and working capital.

Measures taken by companies to monitor cash flow

A few tools are used by organizations to keep track of their cash flow:

  • Cash flow projections show projected revenue and expenditures on a calendar to predict when funds will be available in the future.
  • Cash flow statements illustrate how much money was generated via operations (sales) as opposed to loans or asset sales.

Importance Of Cash Flow Management

importance of cash flow management

Here are the points that determine the importance of cash flow management:

1. Predicts shortcomings

The best part of having cash flow management is that it helps you know about the shortcomings way before time. This gives you enough time to manage your working capital and come up with a better plan.

Here are some instances of predicting shortcomings:

  • Delay a shipment by a few weeks to save customs duty pay
  • Gather collection to wind up remaining bills

2. Lower stress

Handling cash management or cash flow also helps in letting go of stress. Several businessmen face anxiety issues in clearing bills from being unaware of the situation and stressing if things will be resolved or not. It’s best to be aware of what’s going to come your way even if the outlook isn’t good.

3. Know your growth

Handling cash flow lets you know the exact amount of time you’re going to spend on your firm’s growth. Just because your bank account represents some surplus money doesn’t indicate that your life is materialized. When you’ve managed the cash flow for weeks and months, then you’d understand how much cash you must spend and how much must be saved for the future of the business.

4. More Accurate

The term cash flow management is considered to be more apt than budget. By a budget, you’ll know what you wish to do, but cash flow will project and tell you the real occurrence, even if that doesn’t match with the plan created at the start of the year. We all hope to handle everything by not considering cash flow management. But managing the cash flow will help you feel better by letting you be the king of your own money.

How can you protect your company through cash flow management?

Here are some ways using which you can use cash flow management and save your firm from future cash outlays:

Manage Costs

Managing costs and right cost-cutting will render a better and quick result on your main issue of cash outlaying. For instance, you can take measures to cut extra time installments and bonuses or lower the number of employees by excess or steady loss. Another option is to approach lenders and request improved payment terms.

Utilize credit checks

Before engaging with new clients, it’s better to do credit checks. Corporations that usually clear the payments late must be tagged as red flags. You must take up new clients to agree to deals that comprise your payment requirements.

Provide early payment concessions

An easy way to encourage your customers to pay you early is by providing them with concessions and discounts on making early payments. This discount should be put into action when the firm requires cash urgently. If done on regular basis, the gap in profit margins will increase.

Lower your payment term

Lowering your payment term from a month to 3 months is a great business plan. Think of it as the time when you let your clients pay in debts for your services and products, you’re offering them a type of short-term and unsecured loan.

Leasing instead of buying

You can consider renting office furniture, property, apparatus, vehicles, media, or IT hardware instead of buying. The benefit of leasing is that you will only have to make small-term installments. This lets your cash stream, and you can also guarantee the cost of the rent.

Increase your prices

Corporations are generally not in support of increasing their prices since they fear that they’ll lose their important customers to competitors. But here’s a fact, a small increase in prices can work wonders on your overall profit. You can gain clients’ trust by providing packaged services or items.

Corporations are usually resistant to raising their prices as they have a fear of losing trustable customers to their competitors. But a small increase in the prices can work in benefit for your revenues.

File invoices promptly

Several businesses don’t provide invoices fast enough or clear payments late. Each firm is required to gather funds by filing invoices. If in any situation the firm is unable to gather the invoices within the timeframe, they wouldn’t be able to raise funds for clearing further payments.

Utilize invoice financing

One must recruit a firm that offers financing to get instant money. These firms offer cash against your uncleared invoices by charging a fee.

Take external funding

You can pick a bank, or any credit offering organization for short-term funds or use any other alternate source. For instance, investors, partners, peer-to-peer lending, self-account, etc.

Recruit CFO Support Services

The CFO support services help identify the things that can become a threat to your firm and will also assist you in resolving the problem. The CFO services will be your guide in finding ways of fulfilling your capital requirements and also check all outgoings and incomings to assess where can saving and improvements are made.

The CFO predicts and prepares for cash flow and outlays. These predictions will warn you regarding the likely cash outlays. You can then start making a plan or arrangements for extra borrowing if necessary. It will also help you in preparing decisions related to the recruitment of new staff members, increasing your costs, and getting new lenders or tender for a better contract.

Outsource Cash Flow Management Services to India With ODINT

In-house management of cash flow requires experienced staff and a good authorized chartered accountant. Through outsourcing cash flow management services in ODINT, you’ll get benefits from money-saving and it also helps you create a better knowledge about the way money flows in a corporation.

Getting regular financial updates can be very tough for an individual on his own. When you hire us as your outsourcing partner, we offer you timely updates on financial forecasts. We also work to offer you on-point cash flow predictions depending on the financial forecasts for the forthcoming 2-3 years. It’s our main objective to help you focus on your main business operations.

Nevertheless, here at ODINT, we offer cash flow management services that include wide aspects to provide you with a general idea. 

Here is a list of some services that we provide:

  1. Complete support to your clients for business leverage reports.
  2. Timely investment monitoring to lead to investment growth.
  3. Offer you a cash flow evaluation that helps in purchase decisions and expansion.
  4. Full revenue and sales statements will be given by our team on request
  5. Lowering expansion and risk.
  6. We have access to all kinds of the latest IT support and software needed for cash flow management and therefore you don’t have to offer any extra effort for infrastructural resources.
  7. Complete economic package for start-ups and SMEs.


To achieve financial stability and long-term corporate success, one must know how to manage cash flow. You can manage the complex world of cash flow and make sure that your business flourishes in any economic environment by putting effective measures into place, regularly monitoring your finances, and being ready for problems.

In this article, we have discussed cash flow management in detail, including its significance and how to use it to control your business’s cash flow. If you have any additional questions regarding cash flow management, you may speak with specialists at OnDemand International.


A good cash flow would ensure that corporations can pay all workers and also have money for the expansion and business growth. Another important factor is that because of cash flow management, one can pay vendors and bills on time.

In small enterprises, cash flow management helps in keeping track and analyzing the inflow and outflow of cash. Another important reason to manage cash flows is that it helps businesses during emergencies.

Yes, you can trust ODINT Consulting with all kinds of cash flow management services. Our team of skilled professionals will help you in controlling your cash flow.