Cash flow and cost control
- May 1
- 3 min read
Cash flow is now more crucial than ever for maintaining stability, whether your business is recovering or expanding. While revenue, profit, and your bottom line require your focus, ensuring everything operates smoothly is fundamental.
Regular cashflow forecasts help you keep that in focus. Here’s why:
Cost control - If meeting your income targets is challenging, reducing your expenses might provide some additional flexibility to manage cash flow as you strategize your next steps.
Visibility on outgoings - Managing costs can be difficult when it's challenging to identify hidden expenses or when traditional methods are more expensive than necessary. Additionally, you might have faced unforeseen expenses while adapting your business to unexpected situations or rising costs.
Improving business practice - It's more than only keeping an eye on outgoings (though that's important). It's about looking at each aspect of your business and business systems (or the gaps where there should be business systems) to see if poor practice is driving costs up unnecessarily.
It can be useful to break it down - You can examine cost centers like office supplies or freight, or consider how these costs impact your business. Analyzing costs in terms of cost of sales and overheads can be beneficial.
Cost of sale and overheads
Cost of sale (also known as Cost of Goods Sold or CoGS) is how much it costs you to make a sale.
In a business that sells products, the Cost of Goods Sold (CoGS) includes the purchase price of the product along with any expenses required to stock the merchandise and prepare it for sale, such as shipping and handling. It is also possible to calculate the cost of sale for individual units.
Overheads are general business expenses. They can’t be tracked directly to sales. Overheads are what it costs you to open your doors (whether online or actual) every morning.
What’s your plan?
Reduce unnecessary expenses - Trim expenses that aren’t related to your core product or service.
Suppliers - Are you able to work with your providers to ask for discounts or more favourable payment terms on either cost of sale or overhead expenses?
Talk to your team - Analyse your costs and involve your team, including frontline sales staff.
Efficiencies - Are there ways to enhance efficiency and save money? This could include anything from decreasing shipments from suppliers or between stores to utilising AI to save time, money, or both.
Advertising - It might be a false economy to cut back on advertising, as customers are always looking for bargains and price-checking alternatives. But would targeted campaigns work better?
Prioritise - Can you pinpoint products most likely to bring the fastest or best return and hold back on products that are a slower sell?
Promote or discount - If you have old or slow-moving stock, can you discount it and convert old stock to cash? If you attract customers now, you may be able to use it to spotlight other products.
Every dollar you pull back from your costs can go straight into cash flow. Talk to us if you'd like to review your costs and your systems to keep costs under control. Whether your sales are boom or bust, make sure your costs aren't holding you back.
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