The importance of Cash Flow when starting, running & growing a successful business.

Why Cash Flow Is the Lifeblood of Your Small Business (and How to Keep It Flowing)

One of the top reasons small businesses fail is a lack of cash flow. Without cash coming in and going out at the right pace, your business could hit a wall—fast.

For many new business owners, cash flow issues are especially tough in the early days. It often feels like money is only flowing out—covering startup costs, bills, and inventory—while your sales are still finding their footing. This imbalance can drain your resources quickly, and if you don’t address it, it could be game over.

But don’t worry! You’re not alone in this struggle, and there are ways to set your business on the path to financial stability. Let’s dive into how to manage cash flow effectively and avoid common pitfalls.

Why Cash Flow Matters for Small Businesses in Alberta

If you’re an Indigenous entrepreneur or small business owner in Alberta, you likely already know that running a business comes with its fair share of challenges. Managing cash flow is one of the most critical skills you’ll need to succeed, especially in your first six to eight months of operation. This period can make or break your business.

Here’s why:

• Suppliers are hesitant to extend credit to new businesses.

• Customers may ask to pay on credit, delaying your income.

• You have to cover operating costs even when sales are slow.

Without enough cash on hand, these hurdles can create a financial bottleneck that’s hard to overcome.

3 Types of Cash Flow You Need to Understand

To stay on top of your finances, it’s important to understand the three main types of cash flow and how they impact your business:

1. Financing Cash Flow
   Financing involves securing the funds you need to start or sustain your business. For example, applying for a line of credit can help you cover expenses during those lean months. A well-planned financing strategy can set you up for long-term success.

2. Operating Cash Flow
   This is the cash your business generates from its day-to-day operations, like sales and services. Keeping a positive operating cash flow is key to running your business smoothly and building a strong reputation. Happy customers and reliable suppliers lead to better financial stability.

3. Investing Cash Flow
   Whether you’re renovating your space, launching a new product line, or increasing your marketing efforts, these investments are designed to grow your business and improve your cash flow over time.

How to Keep Your Cash Flow in Check

Here are some practical steps to take control of your cash flow and set your business up for success:

1. Monitor Accounts Receivable and Payable
   Keep a close eye on who owes you money and who you owe. Staying on top of payments can prevent unexpected cash flow crunches.

2. Control Inventory
   Overstocking can tie up your cash unnecessarily, while understocking can lead to lost sales. Find the balance that works for your business.

3. Run Cash Flow Reports
   A cash flow report gives you a snapshot of your financial health. It shows how much cash has come in, how much has gone out, and where you stand overall. This report is an essential tool for making informed decisions about your business’s next steps.

4. Plan for the Unexpected
   Set aside an emergency fund to cover unplanned expenses or slow sales periods. Being prepared can make all the difference when challenges arise.

Final Thoughts

Managing cash flow isn’t just about crunching numbers—it’s about understanding how money flows through your business and making strategic decisions to keep it moving. By taking proactive steps like monitoring your accounts, running reports, and seeking financing when needed, you can set your small business up for long-term success.

If you’re feeling overwhelmed, you don’t have to navigate this alone. We specialize in helping Indigenous and small business owners in Alberta stay on top of their bookkeeping and tax needs. Reach out to us today, and let’s keep your business thriving!

Are you starting a new business or just need help understanding how to manage your cash flow? We are here to help. Just Ask-Her!

Thank you; Miigwetch,

Shelilia