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In previous years, profit was perceived to be the main indicator of a business’ success. Leigh-Anne Pierre-Alexander, Aegis Accounting Outsourcing Technical and Projects Assistant Manager shared that cash flow is a stronger indication of success in a business. She discussed the importance of cash management in business and strategies to sustain a healthy cash flow statement.     

“Healthy profit margins do not ensure the sustainability of a business. Rather having adequate cash to finance the growth, daily operation and modernization of a business are more important. A companies’ inability to transform revenues and profits into cash result in a liquidity deficit enterprise.”   

‘Maintaining adequate levels of working capital and capital expenditure are two areas where I see that cash can be quickly depleted, however for businesses to survive they must manage their working capital, invest and innovate’, says Leigh-Anne.   

Cash is necessary to transform a business despite any economic circumstances. This fact increases the importance of having appropriate systems to effectively manage cash, particularly a business’ working capital.   

Working capital is the expenditure of a company that enables its operation. Small and medium-sized businesses often are extremely focused on growth and their working capital is not properly regulated. This usually leads to liquidity problems for small business owners. Leigh-Anne recommends finding and maintaining the balance between the businesses’ accounts receivable and accounts payable to solve this problem.    

Leigh- Anne states, ‘business owners must establish a balance where customers pay you in such an adequate time so that you pay your vendors on time.’    

How can you diagnose the health of your cash flow as a Business Owner?    

Areas that typically alert a business owner that their cash flows are not well-managed lie within the company’s working capital. High levels of aged receivables and reduced vendor balances to maintain supplier relationships stifle a company’s cash-earning potential.   

Additionally, delays or defaults in financing arrangements compound your company’s debt and
indicate a cash deficit company.

Building the Balance between customers and Vendors     

An in-depth understanding of business operations is necessary to find this balance. Here are some key areas to pay attention to in the next quarter:  


  • Review the peak operational seasons of the business and the periods where more inventory is necessary. This is important to cast predictions for an entire financial year so that cash can be managed efficiently.
  • Maintain the balance between a business’ accounts receivable and accounts payable to build and organize a relationship with customers and vendors. Pierre-Alexander advises that reason and convenience must be a feature of this relationship. 

A business owner cannot expect a customer to always pay cash, businesses must facilitate credit systems for their convenience. If you have a credit term to pay vendors in 14 days but you are allowing your customers to pay you in 30 days means you are expelling cash you do not have. Business owners must understand and regulate their relationships with stakeholders and their credit terms. It’s a balancing act.  

  • Explore a cash management strategy is to set metrics through ratios, like the liquidity ratio. Business owners should set a threshold for their ratios and check it routinely in quarterly reports.

Cash Flow Management tips     

1.  Know your business. Gaining an in-depth understanding of your company’s activity is the first step that allows you to understand your cash. E.g. changes in working capital needs over seasonal performance, highs and lows in revenue.   

2. Create a cash plan based on your knowledge gained in point 1. Set standards using historical data to build liquidity metrics/ratios, prepare a cash flow forecast based on your understanding or goals for your business, monitor performance and take the steps necessary to improve deficiencies.   

3. Be smart with your working capital. Agreeing to collection terms with your customers such that they are received before your vendors are knocking on your door is optimum for cash stability and maintaining a healthy business.    

4. Review your financing structures. Search the market! The availability of low-interest
rates on debt financing provides an opportunity for several businesses to restructure
loans resulting in reduced monthly instalments thereby improving cash retention.

5. Invest  

Aegis Business Solutions Limited offers pro-bono discussions to support business owners.   

Our experience in the area allows us to look at your business fundamentally, to prepare cash flow projections, metrics for monitoring and planning.   

As the economic environment continues to change, maintaining a healthy cash flow within a business is becoming increasingly important.