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Managing Your Cash flow

cash flowCash flow is the net amount of in and out of cash and cash-equivalents into a business or simply the cash generated by the operating activities of the business.   Operating activities include the production, sales, and delivery of the company’s products and/or services as well as collecting payment from its customers or making payments to suppliers.

A company’s ability to create value for its business owners or shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow by improving your receivable and managing your payables.

Here are some ways on how you can effectively manage your company’s cash flow:


Thefirst in our list is monitoring.  It will very hard to manage your cash flow if you don’t have regular monitoring.  At Libabun Accounting, you can easily do this by referring to the cash flow reports available in XERO.  These are:

Short-term cash flow–tool designed to help you view and manage your cash flow better. It projects your business’s bank balance 7-30 days into the future, showing the impact or existing bills and invoices.  The dashboard also shows the totals for invoices owed to you and bills to pay.  To use the tool in Xero, go to Business menu, select Short-term cash flow.  Select one or more bank accounts.  Under the projection applies, select Next 7 days or next 30 days.  Then click Show projection.

Sales and Purchases overviews – These can be accessed through the Business menu. On Sales overview, you can see money coming in, what customers owe you the most cash and status of invoices and quotes. While on Purchase overview, it shows information about upcoming bills, when they’re due or if been paid.  You can also see the status of your bills and purchase orders.

Statement of Cashflows- shows how your business has received and used cash within a certain date range. It can show how well your business has generated cash in the past to pay its debt obligations and fund its operating expenses. This report uses a direct method of reporting that shows how cash is created and spent by your business.

Cash Summary Report – shows the movement of cash in and out of your business for a selected period. It gives you a summary of cash received from income less cash spent on operating expenses. It also takes tax inputs and outputs and non-operating movements of cash, like the purchase of office equipment into account

Bank Summary Report – shows cash going in and out of your bank accounts in a certain period. It’s informed by cash transactions like spend or receive money transactions and invoice and bill payments made from bank accounts. It doesn’t include invoice and bill payments made from non-bank accounts like Current Asset or Current Liability account types. This means that you’re only seeing payments in this report that affect your bank accounts.

Also, in XERO, all your Bank balances are shown in one glance by simply referring to your dashboard.  You also have an easy access on daily transactions of your bank accounts by clicking the banks’ account transactions.


Invoice clients as soon as you’ve completed a job or goods have been delivered.  Think about using online accounting technology to send out invoices and track when they’ve been paid. 

Ensure that all invoices are sent to clients.  If you are using XERO, check if there are invoices under drafts or pending for approval.  Refer to the Sales Overview to see your total of awaiting payments and Overdue Invoices.


Have an open and honest conversation with your clients and be proactive about it particularly for those clients that are consistently paying beyond their due dates. Have a negotiation with your clients on how you can help them pay their dues to you.  Consider offering your customers incentives, such as a percentage off the total, for early payments. Do the math beforehand to ensure the tradeoff (getting paid early) is worth the loss (less money in the long run).

Automate as much as you can.  In XERO, you can use the Invoice reminder feature where you can send reminders to your clients on their payments before they become overdue.  This can be set-up in XERO automatically in Business menu>Invoices>Invoice reminders.

Make it easy for your customers to pay.  Useonline payment platform like PayPal, Wordpay, Stripe, and Gocardlessfor your clients to use in paying you and have this informationavailable in your invoice.  These online payment applications are all integrated with XERO.


It would be easier for your business to comply with the tax laws and ensure that you have adequate funds when it comes time to pay the taxes if you set aside enough money regularly and put it in a separate account.  Putting money in a separate account for income tax, VAT return, etc, makes it less likely you’ll spend it.


Make sure your business is operating at its optimal efficiency to minimize waste or achieve zero waste.

Review your recurring monthly expenses and see to check if there are costs that you can remove or reduce like subscriptions or insurance you no longer need, or reduction on your office supplies.


Top reason on getting business credit card is to keep your business and personal expenses separate.  It allows you to track business spending and makes it easier on record-keeping come. 

Another benefit is credit cards are easier to obtain than a bank loans, they can provide a simple way to purchase equipment, supplies, or inventory. 

And just like personal credit cards, business cards will often offer points, cash-back, or other nice perks.

NEGOTIATE WITH SUPPLIERS – Unless there’s a worthwhile incentive for you to pay early, figure out how late you can pay your vendors without risking late fees or harming your relationship. This keeps the cash in your account and out of your vendor’s until it absolutely has to be there.