Cash flow can make or break your business. Here are the basics everyone should know.

Some of the best businesses you’ve never heard of were brought down by cashflow problems. In fact, according to a U.S. Bank survey, an overwhelming 82% of failed businesses cited cash flow problems as a reason for their failure.

On the other side of the coin, most of today’s most successful companies made it to the top of their industry, at least in part, because they understood the importance of cashflow and invested time and energy into mastering it.

That includes large corporations like Nike and The Home Depot—two of the most famous examples of businesses that were nearly brought down by cash flow problems at pivotal growth moments—as well as mid-sized organizations and small businesses.

The reasons for these problems are as varied as the businesses they impact. Cash flow, which refers to the net change in a company’s cash position during a specific period, often becomes an issue when a company makes a large capital investment to acquire new technology or expand. As we saw during the pandemic and the 2008 financial crisis, cash flow can also bring down an otherwise healthy business during periods of widespread disruption. Other reasons include: issues with product prices, overtrading or over-investing, lax repayment policies with vendors and customers, debt, high overhead, and intense periods of high demand.

But mastering your cash flow is about more than preventing problems. Understanding how money moves through your business can give you a competitive advantage, helping you make your business more efficient and plan smarter.

First, let’s take a look at the biggest advantages of mastering your cashflow. Then we’ll explain how you can get started.

Why should you stay on top of your cash flow?


People often assume that a business’ success is based on its revenue, but that’s only part of the equation. It often comes down to timing: Do you have the cash you need when you need it? When is the best time to make investments? Are you ready for a rainy day?

When you master your cashflow, you understand how and when cash moves through your business. With that understanding, you can:

1.) Make smarter plans and more confident decisions. A well-made cashflow projection is like a window to the future. Using past data and projected future conditions, it allows you to estimate how much cash your business will have next week, next month, or six months from now, as well as the expenses you can expect to be paying at those times. This can help you plan your investments at the optimal time, prevent cashflow problems from occurring, and stay away from that red line.

2.) Make your business more efficient. Examining your cashflow gives you a detailed picture of your business’ expenditures, helping you identify areas where you can cut costs.

3.) Plan for crisis situations. There are some economic and social crises, like COVID-19, that no one could prepare for. However, knowing that these situations do occur, you can manage your cashflow to ensure that your business has resources on hand to survive emergency situations.

4.) Grow and invest efficiently. It’s somewhat counterintuitive that many businesses fail as soon as they begin to grow, but the reality is that growth—whether you’re opening a new location or, as is common in the manufacturing industry, investing in expensive new equipment—takes a lot of capital. And the cash you invest in one thing can cause you to lapse in other areas, creating a domino effect that can quickly send an otherwise-healthy business spiraling into debt. During growth periods, managing your cashflow can help you get the timing of your investments right, ensuring you always have the cash you need to keep your business running.

How can you master your cashflow?


Our team works with a wide variety of mid-sized organizations: manufacturing, construction, distribution, real estate, not-for-profits, family-owned businesses, professional service firms and service providers.

Based on our experience, every business can benefit from smart cashflow management.

Here’s how: Start by creating a cashflow report, a statement that breaks down the cash your business received and spent during a given period, noting the timing of costs and revenue. In general, a cashflow report should contain three main sections: Operating Activities, which detail revenue and expenses that’s generated as the company delivers its goods and services; Investing Activities, which consist of cashflow from purchasing or selling assets (not including debt); and Financing Activities, which include cashflow from debt and equity financing.

Using your cashflow statement, we can get a clear picture of how cash moves through your business, allowing you to identify patterns and areas of improvement, plan investments in the future, and avoid a cashflow crisis.

Want some help? Cashflow management is important, but it can also be complicated—and it’s only one component of a strong business strategy. For decades, Dugan & Lopatka’s team of financial experts has helped numerous businesses in the Chicagoland region achieve their goals and navigate the complicated financial landscape. Contact one of principals below to learn how we can help you and your business manage your cashflow and maximize your potential.

Leo Misdom, Principal Shareholder, Outsourced Accounting and Accounting & Advisory Services Departments,

Mike Lee, Principal, Outsourced Accounting and Accounting & Advisory Services Departments,

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