A company can be profitable on paper and still face liquidity problems. The difference lies in cash flow: knowing what funds are available, which collections are expected and which payments will need to be made over the coming weeks.
Cash flow control is not the same as accounting
Accounting records and classifies transactions according to accounting and tax criteria. Cash flow answers a more immediate question: what money is coming in, what money is going out and when will each movement take place?
Your accountant or adviser may manage the books perfectly while management still needs an internal monitoring system. The two functions complement each other. Cash flow control uses operational information that may not yet appear in the accounts, such as accepted quotations awaiting invoicing, issued invoices not yet collected, committed payments or planned expenses.
Create a real schedule of collections and payments
The starting point is an up-to-date list of future movements. For every issued invoice, record the amount, client, issue date, due date and status. Do the same for payments: supplier, amount, expected date and status.
This structure removes the need to manage due dates from memory or from the inbox and makes it easier to identify weeks with an unusually high concentration of payments.
Separate invoicing from collection
Issuing an invoice does not mean it has been collected. In service businesses it is common to measure the month by invoiced revenue while overlooking the fact that a significant portion may still be outstanding.
A monitoring dashboard should distinguish at least between issued invoices, collections received, overdue invoices and upcoming due dates. When follow-up is periodic, chasing an overdue payment becomes part of the normal administrative process rather than an exceptional action.
Classify expenses to understand the business
Recording an expense is useful; classifying it correctly provides much more information. Depending on the business, expenses can be grouped by project, client, company, cost centre, supplier or category.
This classification supports simple dashboards showing where spending is concentrated and how it develops. For businesses managing several projects at once, project-level control is particularly useful.
Work with a forecast, even if it is not perfect
A cash flow forecast does not need to predict every cent to be useful. Its purpose is to anticipate scenarios. It can show the expected balance over the next four, eight or twelve weeks by incorporating expected collections and committed payments.
Regularly reviewing the forecast makes it possible to act early: defer a non-priority expense, accelerate collection follow-up, renegotiate a due date or reserve liquidity for an important payment.
Would you like to apply this in your business?
At Smarlity, we can take on part or all of your administration, financial monitoring and process organisation. We first analyse how you currently work and then define with you what should be delegated, organised or automated.