Your 2024 Guide to Cash Flow Funding

“Never take your eyes off the cash flow because it’s the lifeblood of business,” was Sir Richard Branson’s sage advice to business owners. In his 2006 book, Screw It, Let’s Do It he also warns that “Long-term success will never come if profit is the only aim.” Somewhat ironically for a business magnate and billionaire, Branson doesn’t seem to set nearly as much store by profit as he does by cash flow. 

But perhaps what Branson understands as a seasoned entrepreneur is that both cash flow and profit are robust indicators of the financial health of a business. However, while profit is essential for long-term sustainability, cash flow represents the immediate survival of the business and is, therefore, of critical importance for growing businesses. 

With that in mind, we’ve created the ultimate Guide to Cash Flow to equip business leaders with the information they need to make informed decisions about how best to support their cash flow and reach long-term profitability.

Understanding the importance of cash flow in growing businesses 

First, let’s discuss the difference between profit and cash flow. 

Definition: Profit describes the amount of money that is left over after you subtract expenses from revenues. On the other hand, cash flow represents the net balance of cash moving in and out of a business over a specific period. 

Focus: Profit focuses on the overall financial performance of the business during a specific period. Cash flow focuses on the liquidity and operational aspects of the business. 

Measurement: Cash flow reflects the real-time movement of cash in and out of the business during a defined period like a month or a quarter, and is summarised in a cash flow statement. On the other hand, profit is measured using accounting principles, and may include revenues earned but not yet received and expenses incurred but not yet paid. Profit is typically reported on an income statement. 

Significance: Although profit is essential for the long-term viability of the business, cash flow is essential for daily operations and functionality. Companies can be technically profitable but still face major issues if they have poor cash flow, which means that effectively managing cash flow should be a top priority for short-term viability. 

Tips for improving cash flow for small businesses 

Here are a few practices that you could implement in your growing business to ensure that cash flow is consistent: 

• Separate personal and business income streams to clarify your view of the state of cash flow in the business 
• Embrace upfront payments to your suppliers and, conversely, depending on your industry, offer early bird discounts to your own customers to incentivise timely payments and ensure a cyclical flow of cash in and out of the business 
• Make sure you have a safety net in place to cover day-to-day expenses in case there are gaps between paying suppliers and being paid 
• Use accounting software like Xero, Sage, or Quickbooks to forecast your cash flow patterns and time opportunities like marketing campaigns or team expansions effectively 

Cash flow forecasting is much more credible than crystal balls. We wrote this article on the benefits of cash flow forecasting for growing businesses; it’s full of other useful information about cash flow, too. 

Are there benefits to cash flow funding for small businesses? 

Before they can prioritise profit, South African SMEs commonly face cash flow interruptions that require immediate attention. Most of this is up to timing; you can’t pay your suppliers until you’ve been paid by your customers, and the whole business threatens to stall to a halt. That doesn’t have to be the case — you can always apply for cash flow funding as a backup to help keep the cogs turning, even if cash flow has temporarily slowed to a trickle. 

Cash flow funding, or credit options that are designed specifically to meet the short-term needs of growing businesses, offer a solution that breaks the cycle and supports consistent cash flow. 

What are the best cash flow funding options for my growing business? 

As far as cash flow funding goes, growing businesses would do well to investigate alternative financing options like a business line of credit, invoice financing, or even a term loan for bigger growth opportunities. If you are looking for a solution that will support healthy cash flow, then a revolving credit facility that gives you instant access to capital when and where you need it is ideal. 

As an organisation that is passionate about supporting the sustainable growth of local SMEs, Bridgement offers a range of business funding solutions that are specifically designed to suit the needs of growing enterprises. 

Unlike traditional funding solutions, which can have long wait times, complex application processes, and collateral requirements, Bridgement’s range of alternative funding solutions is fast, flexible, and commitment-free. You’ll always know the true cost of finance before you sign anything, and you’ll only ever pay for the financing that you use. You can even get an estimate of the cost of your facility with our obligation-free repayment calculator.