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Skip to 0 minutes and 9 seconds Cash flow is a critical part of any business. It’s really important to understand what’s coming in through your sales and what’s going out through absolutely just even maintaining your business. And I think that’s something that a lot of newbies underestimate– how much it really does take to run a business. It’s not just producing a product and putting it out in the market, it’s all those other things that you may not have even thought about that your business is founded on. What’s really important to my company in managing cash flow is having a look at the profit and loss statements, which are produced by my bookkeeper every quarter.

Skip to 0 minutes and 49 seconds And how that really helps me is to maybe have a look at some of my expenditures and I can make adjustments. For example, my car is getting a little bit old. It’s using more and more of my cash to maintain it. There’ll come a time when I have to actually address that issue– whether I keep the car, sell it, lease another vehicle, and so on. All of these things make a big difference to your cash flow.

Skip to 1 minute and 16 seconds Cash flow for us is incredibly important. We need to make sure that that money is coming in so that we can grow. So, I often meet with my bookkeeper, and we can sit down and we can estimate what’s money going to be coming in based on our subscriber base that we currently have with renewals. And then we also look at what the expenses are. So, we can go through things and forecast whether or not we have particular funds there that are available to enable us to grow. So the website development is a great example of that. The other thing is, perhaps, production. We might up our production if we have the funds available.

Skip to 1 minute and 52 seconds For us, for the cash flow situation, we need to ensure that we’ve always got that money coming in. So when it comes to renewing the actual subscription, they will receive an e-mail. They will receive a reminder a few weeks before, a couple of weeks before. And it’s all done with automatically so we don’t have to actually make those calls ourselves. We find that if they don’t pay, then their subscription gets cut off. It’s only happened three times, so for us it’s working.

Skip to 2 minutes and 19 seconds So, I guess the combination of having an accountant and a bookkeeper means that they can guide me in where I need to go with the business, what areas I can grow the business in, what’s perhaps costing us too much money. So then we look at the profit and the loss and where we can generate our sales and what generates the most sales.

Cash is king in making a statement

Cash is king. It takes cash for the business to pay it’s bills, and cashflow statements, reflect the cash inflows and outflows over time e.g., the three months to 30 June. Focusing on a cashflow statement makes a good statement for a small business.

The online business entrepreneur must be aware of what money is coming into the business (inflow) cash from sales, or owner contributions; and what is needed to go out of the business (outflows): purchase of stock items, phone and internet costs.

Cashflow statements are provided for both internal or external uses: Internal cashflow statements are used by the business owner to understand how much money the business is generating (money coming in) and is available to pay debts (money going out); External cashflow statements are generated by your bookkeeper or accountant for the purpose of obtaining finance for the business, such as a bank loan.

There are three types of activities that comprise the external cashflow statement:

  • Operating Activities - cash received and paid from operating the business e.g. money received from customers, payments to suppliers and employees.
  • Investing Activities - cash flows that relate to the sale or purchase of non current assets e.g. property, plant or equipment.
  • Financing Activities - cash flows when the owner puts cash into the business or withdraws cash for personal use, or when loan funds are received or repaid

Many businesses fail because they have not closely understood their cashflow needs.


Reflect and identify the various types of inflows and outflows that you think you will incur in your business.

Share in the Comments area two examples of inflow and outflow items that you think you will incur; and how you think this may impact on your cashflow statement.

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This video is from the free online course:

Online Business: Pricing for Success

RMIT University