Specialty Fabrics Review May 2020 - 52

FOCUS

BUSINESS

Cash flow management
Strategies for steadier inflows and outflows.
BY MARK E. BATTERSBY

C

ash flow is the lifeblood of every business. In fact, according to a recent U.S. Bank
study, poor cash flow management causes 82 percent of U.S. business failures. Although
seemingly counterintuitive, many experts advise putting cash flow management
before profits.
While profits are how a fabrication business survives, a failure to manage the operation's
cash flow can mean running into problems that one profitable accounting period might not
be able to offset. Another study, this one by Intuit, revealed that 61 percent of small businesses
around the world struggle with cash flow and 32 percent are unable to pay vendors, pay back
pending loans, or pay themselves or their employees due to cash flow issues.

Cash flow core values
According to a U.S. Bank study, 82
percent of businesses fail due to cash
flow mismanagement. Use these
strategies to manage your cash flow.
*Keep three- to six-month
cash reserves
*Keep inventory lean
*Run a tight ship with
invoicing and collections
*Control costs
*Extend credit with caution

CASH FLOW MANAGEMENT 101
In essence, cash flow is nothing more than the movement of money in and out of the business.
Cash flows into the business from sales of goods, products or services. Money flows out of the
business for supplies, raw materials, overhead and salaries in the normal course of business.
An adequate cash flow means a steady flow of money into the business in time to be used
to pay those bills. How well the fabricating professional manages the operation's cash flow
can have a significant impact on the bottom-line profits of the business.
Often, an operation's cash inflows will lag behind its cash outflows, which leaves the
business short of money. This shortage, or cash flow gap, represents an excessive outflow of
cash that may not be covered by a cash inflow for weeks, months or even years.
Properly managing the operation's cash flow allows that cash flow gap to be narrowed
or closed completely before it reaches the crisis stage. This is usually accomplished by
examining the different items that affect the operation's cash flow-and looking at the
various components that directly affect cash flow. This analysis can answer important
questions such as the following:
* How much cash does the business have?
* How much cash does the business need to operate and when is it needed?
* Where does the business get its cash and where does it spend it?
* How do the operation's income and expenses affect the amount of cash
needed to operate the business?
CONTROLLING INFLOW
In a perfect world, there would be a cash inflow, usually from a cash sale, every time there is
an outflow of cash. Unfortunately, this occurs very rarely in our imperfect business world,
thus the need to manage the cash inflows and outflows of the business.
Obviously, accelerating cash inflows improves overall cash flow. After all, the quicker cash
can be collected, the faster the business can spend it. Put another way, accelerating cash flow
allows a business to pay its own bills and obligations on time or even earlier than required. It
may also allow the business to take advantage of trade discounts offered by suppliers.
CONTROLLING OUTFLOW
Outflows are the movement of money out of the business, usually as the result of paying
expenses. A manufacturing business's biggest outflow most likely involves the purchase of
raw materials and other components needed for the manufacturing process. If the business
involves reselling goods, the largest outflow will most likely be for the purchase of inventory.
Purchasing fixed assets, paying back loans and paying bills are all cash outflows.

52 REVIEW MAY 2020

0520RV_p49-57.indd 52

4/18/20 10:58 PM



Specialty Fabrics Review May 2020

Table of Contents for the Digital Edition of Specialty Fabrics Review May 2020

Specialty Fabrics Review May 2020 - Cover1
Specialty Fabrics Review May 2020 - Cover2
Specialty Fabrics Review May 2020 - 1
Specialty Fabrics Review May 2020 - 2
Specialty Fabrics Review May 2020 - 3
Specialty Fabrics Review May 2020 - 4
Specialty Fabrics Review May 2020 - 5
Specialty Fabrics Review May 2020 - 6
Specialty Fabrics Review May 2020 - 7
Specialty Fabrics Review May 2020 - 8
Specialty Fabrics Review May 2020 - 9
Specialty Fabrics Review May 2020 - 10
Specialty Fabrics Review May 2020 - 11
Specialty Fabrics Review May 2020 - 12
Specialty Fabrics Review May 2020 - 13
Specialty Fabrics Review May 2020 - 14
Specialty Fabrics Review May 2020 - 15
Specialty Fabrics Review May 2020 - 16
Specialty Fabrics Review May 2020 - 17
Specialty Fabrics Review May 2020 - 18
Specialty Fabrics Review May 2020 - 19
Specialty Fabrics Review May 2020 - 20
Specialty Fabrics Review May 2020 - 21
Specialty Fabrics Review May 2020 - 22
Specialty Fabrics Review May 2020 - 23
Specialty Fabrics Review May 2020 - 24
Specialty Fabrics Review May 2020 - 25
Specialty Fabrics Review May 2020 - 26
Specialty Fabrics Review May 2020 - 27
Specialty Fabrics Review May 2020 - 28
Specialty Fabrics Review May 2020 - 29
Specialty Fabrics Review May 2020 - 30
Specialty Fabrics Review May 2020 - 31
Specialty Fabrics Review May 2020 - 32
Specialty Fabrics Review May 2020 - 33
Specialty Fabrics Review May 2020 - 34
Specialty Fabrics Review May 2020 - 35
Specialty Fabrics Review May 2020 - 36
Specialty Fabrics Review May 2020 - 37
Specialty Fabrics Review May 2020 - 38
Specialty Fabrics Review May 2020 - 39
Specialty Fabrics Review May 2020 - 40
Specialty Fabrics Review May 2020 - 41
Specialty Fabrics Review May 2020 - 42
Specialty Fabrics Review May 2020 - 43
Specialty Fabrics Review May 2020 - 44
Specialty Fabrics Review May 2020 - 45
Specialty Fabrics Review May 2020 - 46
Specialty Fabrics Review May 2020 - 47
Specialty Fabrics Review May 2020 - 48
Specialty Fabrics Review May 2020 - 49
Specialty Fabrics Review May 2020 - 50
Specialty Fabrics Review May 2020 - 51
Specialty Fabrics Review May 2020 - 52
Specialty Fabrics Review May 2020 - 53
Specialty Fabrics Review May 2020 - 54
Specialty Fabrics Review May 2020 - 55
Specialty Fabrics Review May 2020 - 56
Specialty Fabrics Review May 2020 - 57
Specialty Fabrics Review May 2020 - 58
Specialty Fabrics Review May 2020 - 59
Specialty Fabrics Review May 2020 - 60
Specialty Fabrics Review May 2020 - Cover3
Specialty Fabrics Review May 2020 - Cover4
https://www.nxtbook.com/ata/specialtyfabricsreview/specialty-fabrics-review-october-2022
https://www.nxtbook.com/ata/specialtyfabricsreview/specialty-fabrics-review-september-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-august-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-july-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-june-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-buyers-guide-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-may-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-april-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-march-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-february-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-january-2022
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-december-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-november-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-october-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-september-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-august-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-july-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-june-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-buyers-guide-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-may-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-april-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-march-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/specialty-fabrics-review-february-2021
https://www.nxtbook.com/ifai/specialtyfabricsreview/0121RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1220RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1120RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1020RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0920RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0820RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0720RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0620RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/RVBG20
https://www.nxtbook.com/ifai/specialtyfabricsreview/0520RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0420RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0320RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0220RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0120RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1219RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1119RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1019RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0919RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0819RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0719RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0619RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/RVBG19
https://www.nxtbook.com/ifai/specialtyfabricsreview/0519RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0419RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0319RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0219RV_Feb
https://www.nxtbook.com/ifai/specialtyfabricsreview/0119RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1218RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1118RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/1018RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0918RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0818RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0718RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0618RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0518RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/RVBG18
https://www.nxtbook.com/ifai/specialtyfabricsreview/0418RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0318RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0218RV
https://www.nxtbook.com/ifai/specialtyfabricsreview/0118RV
https://www.nxtbookmedia.com