A guide to cash flow management

Managing cash effectively is part and parcel of keeping your business afloat and thriving. From balancing everyday expenses to making smart investments, small businesses and enterprises need to manage their cash flow carefully to stay competitive.

But what exactly does that mean, and how can businesses get it right? Let’s dive into the key aspects of managing cash flow, why it matters, and how it can set your business up for success.

This guide will cover:

• What is cash flow management?
• Why is cash flow management important?
• The full cycle of cash flow management: From generation to tracking
• Cash flow management strategies: Effectively managing your cash flow
• Tracking cash flow
• Example of cash flow management in hospitality
• Common cash flow and cash flow management issues
• Signs your hospitality business needs to optimise cash flow
• Importance of effective cash flow management in hospitality
• How Dojo payments can help
• FAQs

The money mover: What is cash flow management?

Cash flow management is the process of tracking the money coming in and going out of a business. It’s not just about knowing how much is in the bank at any given moment, but about ensuring the business has enough liquidity to cover its expenses, invest in growth, and stay financially stable.

Bottom line booster: Why is cash flow management important? 

Effective cash flow management and forecasting is key to keeping a business running, helping you:

• improve cash flow 
• plan for future expenses and seize opportunities
• identify potential issues early for quick action
• prevent small problems from escalating.

Improve cash flow and cash flow management

There are a few different ways businesses can generate and manage cash flow:

Cash flow via operations

This is all about what your business earns day-to-day. To maximise cash flow, focus on increasing sales, or cutting back on unnecessary costs. Little changes, like negotiating better deals with suppliers or streamlining how you work, can make a big difference to the cash coming in.

Cash flow via investment

Investments, like buying new equipment, technology like card machines, or property, might cost upfront but can pay off later. Whether it's selling an asset or getting returns on your investment, this can help with long-term cash flow. 

Cash flow via financing

Bringing in money from outside, like loans or investors, can improve cash flow. But be careful with how much you borrow and keep an eye on repayments, so you don’t end up hurting your cash flow down the line. It’s about balancing the benefits with what you owe.

The playbook: Cash flow management strategies

Managing cash flow effectively takes more than just monitoring the numbers. Businesses need a solid framework to stay on top of their finances. Here are some key strategies to help maintain strategic cash flow management:

1. Clear budgeting and forecasting

Create a clear, realistic budget. Regularly tracking your income and expenses helps you see where your business stands and plan for any cash flow gaps.

2. Clear and itemised records

Keeping detailed records of every transaction helps identify unnecessary expenses, track trends, and spot areas where cash flow could be improved.

3. Consistent reviews of spend

Schedule time each month to go over your outgoings and assess whether every cost is necessary or a smart investment. This proactive approach helps cut unnecessary costs and frees up cash for more critical aspects of the business.

4. Investing in secure, dependable tech

Downtime can seriously disrupt cash flow, especially for businesses that rely on taking payments. By investing in reliable, dependable technology that actively works to mitigate your business against outages, you can keep operations running smoothly when others might face disruptions. 

Choose 99.99% uptime with our resilient payment tech, which keeps your cash flow steady, so you can focus on growth without worrying about interruptions.

5. Diversifying workstreams

Expanding your offerings can boost cash flow management for small businesses – especially during quiet periods. For hospitality businesses, this might mean hosting events with Temporary Event Notices (TENs) or offering alternative experiences like hotdesking during slow hours. 

Dojo bookings, our restaurant management system, makes it easy to turn bookings into extra revenue. It simplifies managing those quieter periods while helping businesses boost cash flow and create better experiences for their customers.

6. Understanding the warning signs

Keep an eye out for early warning signs that cash flow is tightening. This could be missed payments, lower sales, or rising expenses. By putting spend buffers into your budget or setting up alerts when thresholds are met, you can take action before any serious damage occurs.

7. Make use of support

There are organisations available that provide valuable advice, funding opportunities, and tools to help streamline cash flow management for small businesses and enterprises alike:

• UK Government's business finance support: offers a range of loans, grants, and advice for small businesses, including cash flow management and forecasting tools and support.
• British Business Bank: provides insights and financial tools specifically for small businesses looking to improve their cash flow and financial stability.
• Federation of Small Businesses (FSB): offers advice, funding options, and access to financial planning tools to help small businesses manage their cash flow.
• Enterprise Nation: provides mentoring, advice, and resources to help businesses with cash flow planning and management.
• Dojo business funding: offers fast, flexible funding to help businesses improve cash flow and stay on top of finances without disrupting daily operations.

The playbook: Cash flow management strategies

Managing cash flow effectively takes more than just monitoring the numbers. Businesses need a solid framework to stay on top of their finances. Here are some key strategies to help maintain strategic cash flow management:

1. Clear budgeting and forecasting

Create a clear, realistic budget. Regularly tracking your income and expenses helps you see where your business stands and plan for any cash flow gaps.

2. Clear and itemised records

Keeping detailed records of every transaction helps identify unnecessary expenses, track trends, and spot areas where cash flow could be improved.

3. Consistent reviews of spend

Schedule time each month to go over your outgoings, and assess whether every cost is necessary or a smart investment. This proactive approach helps cut unnecessary costs and frees up cash for more critical aspects of the business.

4. Investing in secure, dependable tech

Downtime can seriously disrupt cash flow, especially for businesses that rely on taking payments. By investing in reliable, dependable technology that actively works to mitigate your business against outages, you can keep operations running smoothly when others might face disruptions. 

Choose 99.99% uptime with our resilient payment tech, which keeps your cash flow steady, so you can focus on growth without worrying about interruptions.

5. Diversifying workstreams

Expanding your offerings can boost cash flow management for small businesses – especially during quiet periods. For hospitality businesses, this might mean hosting events with Temporary Event Notices (TENs) or offering alternative experiences like hotdesking during slow hours. 

Dojo bookings, our restaurant management system, makes it easy to turn bookings into extra revenue. It simplifies managing those quieter periods while helping businesses boost cash flow and create better experiences for their customers.

6. Understanding the warning signs

Keep an eye out for early warning signs that cash flow is tightening. This could be missed payments, lower sales, or rising expenses. By putting spend buffers into your budget or setting up alerts when thresholds are met, you can take action before any serious damage occurs.

7. Make use of support

There are organisations available that provide valuable advice, funding opportunities, and tools to help streamline cash flow management for small businesses and enterprises alike:

• UK Government's business finance support: offers a range of loans, grants, and advice for small businesses, including cash flow management and forecasting tools and support.
• British Business Bank: provides insights and financial tools specifically for small businesses looking to improve their cash flow and financial stability.
• Federation of Small Businesses (FSB): offers advice, funding options, and access to financial planning tools to help small businesses manage their cash flow.
• Enterprise Nation: provides mentoring, advice, and resources to help businesses with cash flow planning and management.
• Dojo business funding: offers fast, flexible funding to help businesses improve cash flow and stay on top of finances without disrupting daily operations.

The pulse check: Tracking cash flow

Hospitality businesses can track their cash flow by regularly reviewing financial forecasts and cash flow statements. Forecasts help predict future income and expenses, while cash flow statements provide a real-time overview of how money moves in and out. 

By keeping a close eye on these, hospitality businesses like restaurants and cafes can stay ahead of potential issues and act quickly.

Real-world wins: Examples of cash flow management in hospitality

In hospitality, cash flow management and forecasting comes down to a few key strategies:

• negotiating better payment terms with suppliers to ease cash pressure
• running strategic promotions during quieter periods to boost revenue
• adjusting staffing levels to match demand and prevent overspending
• using cash flow forecasts to prepare for busy or slow periods
• diversifying income with seasonal specials or takeaway options
• investing in reliable tech to keep operations running smoothly and avoid cash flow issues.

Strategic cash flow management in action

A full-service restaurant facing a post-holiday slowdown, like the period between Christmas and New Year, could use cash flow forecasts to anticipate lower footfall.

To stay ahead during those quieter weeks, a restaurant might tweak staff schedules to avoid overstaffing when footfall is lower. On top of that, running a special lunch deal for nearby office workers or hosting an intimate dinner event with a limited-time menu could keep the tables turning. 

By making these adjustments, the restaurant is putting strategic cash flow management into action, ensuring the cash keeps flowing steadily until things pick up again.

Red flags: Common cash flow and cash flow management issues

• Cycling industries: Hospitality businesses often face cycles of high and low revenue, particularly during seasonal shifts. Not planning for these fluctuations can create gaps in cash flow and cash flow management.
• Inaccurate estimates: Not having a clear picture of upcoming expenses can quickly lead to cash flow problems, especially due to unexpected fluctuations in hospitality.
• Seasonal revenue dips: Hospitality businesses know the struggle of quiet seasons. With our reliable tech, you can keep cash flowing even when footfall is down.
• Growing too fast: Expanding quickly without proper forecasting can stretch your cash thin, making it harder to stay on top of expenses.
• Relying on credit: Covering everyday costs with credit might help in the short term, but it can lead to long-term cash flow stress.
• Tech trouble: Outdated systems or a lack of proper accounts receivable processes can cause cash flow friction, making it harder to get paid on time.

When to act: Signs your hospitality business needs to optimise cash flow

• Missed or late payments: Struggling to pay suppliers or staff on time reflects a need for proper cash flow and cash management.
• Missed investment opportunities: If you're passing on growth opportunities due to cash flow issues, it's a good idea to reassess.
• Juggling funds: Constantly moving money around to cover basic costs is a sign your cash flow needs attention.

Why it matters: Importance of effective cash flow management in hospitality

• Making the most of your funds: Managing cash flow well means businesses can use their money more efficiently.
• Spotting investment opportunities: Whether you’re expanding, hiring more staff, or investing in better tech, like our reliable payment systems, strong cash flow lets you take advantage of opportunities.
• Attracting investors: Healthy cash flow helps build trust with investors, showing your business is stable and worth backing.
• Staying resilient: Good cash flow management and forecasting keep your business steady during tough times and help it bounce back stronger.