Hi there, my name's Geily and I'm super excited that Matthew has invited me to guest post on the Good Brand Partners blog today!

I'm here to share my knowledge on a topic I am extremely well versed in: Cash Flow.

Now, one of the most important components of profit is cash flow. After all, profit is what differentiates a hobby from a business and the only way we can turn a profit is through financial planning and understanding cash flow so we can manage it more efficiently.

Understanding cash flow and knowing what and where to look can make all the difference between a thriving business and a business that’s constantly in the red. Let's get into it, shall we?
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Revenue vs. Profit vs. Cash Flow

Whereas revenue refers to your top line or sales, profit is much more in-depth as it relates to the bottom line, and we could refer to cash flow as the overall concept tying these two together, the flow of money in and out of your business.

My favorite analogy to use to help small business owners wrap their heads around this concept is this:
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Visualize cash flow as a river:

Water coming in - services rendered

Water flowing out into other streams - operating expenses, taxes, reserves, owner’s draws, etc.

As long as there’s enough water flowing in and just the right amount of water flowing out, the river is less likely to dry up, therefore, turning a profit time and time again.
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There are 3 keys to cash flow:

1. Timing (inflow before outflow)

2. Amount (inflow greater than outflow)

3. Cash flow planning and cash flow management
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Cash flow planning is looking weeks or even months into the future

Cash flow management is setting up financial systems in your business to manage the inflows and outflows

This is what helps you make decisions such as:

• when should I outsource
• when can I invest in XYZ
• when can I pay XYZ
• how much money do I need to be bringing in
• how can I pay myself x amount

Effective cash flow practices alongside strategic decision-making lead to an overflow (a business that is profitable with a healthy and positive cash flow) as opposed to a dried-up river (a business burdened with ongoing money problems, struggling, or on the verge of closing).
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Maximizing profits and managing cash flow 

Maximizing profits and managing cash flow starts at the top. It’s important to look at your gross profit, which takes your sales and deducts any COGS (cost of goods sold), expenses that are directly tied to the products or services being sold. Your gross profit will indicate how profitable your products or services are. Generating positive cash flow at this point is the first step to turning a profit. 

The next place to look is your operating expenses, or OPEX. OPEX refers to the expenses necessary to run your business, think of rent, office expenses, marketing and branding expenses ect. However, while we’re saying expenses, know that sometimes, some may be best identified as investments, an expense that yields a positive ROI. For instance, things like investing in marketing, branding, and brand experience, just to name a few, may be expenses on paper but when done at the right time, in the right way, yield a positive ROI for you, increasing revenue and maximizing profits. 

Cash flow issues arise from OPEX most times, while your top line may look great, it may be your bottom line that tells a different story. They may look like: 

• making money but constantly feeling like you have no money. This is likely due to excessive spending or poor financial decision-making that fails to look at the financial picture as a whole.
• having trouble meeting the business’s financial obligations like payroll or other bills, you likely have a cash flow problem.
• finding yourself falling into the debt trap, this likely means there’s a cash flow problem.
• constantly funding the business with personal money, there’s a high chance you have a cash flow problem.
  
  

Every business faces cash flow issues at some point, sometimes the more you make the more you spend. 

Sometimes, we hit six figures but it doesn’t feel the way we thought it would. If so, it may be an indication of cash flow issues in your business. The business made more money but did you? Your leads and sales are up, but how’s your bank balance? More money doesn’t always fix the issue. Sometimes it’s more like throwing gasoline on a fire. 

I’ve found that at the core of this issue is a lack of financial clarity, strategy, and planning. Sometimes, not taking your business finances seriously enough, soon enough is a root cause of cash flow problems. 
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3 Actionable steps to take you from cash flow issues to sustainable growth 

You now know what cash flow is, the 3 keys to generating positive cash flow, and where and what to look for to maximize profits and manage cash flow. Let’s dive into some actionable steps you could implement right away to take you from cash flow issues to sustainable growth.   

1. Identify 1 thing you could fix today.

Maybe that’s making sure your financial record-keeping is top-notch. If you feel your financial records could be disorganized or lacking altogether, I’d recommend you start here. Know that accurate financial records are essential for addressing cash flow issues. Or let’s say, you have accurate financials, but have picked up on the fact that it may be more of a cash flow system and strategy the issue you may be facing. In that case, seeking out financial support that goes beyond the books, may be the way to go. 

2. Have a financial plan that gives you a holistic view of your business.

Not having one opens you up to excessive spending from the getgo, which is one of the main causes of cash flow issues small businesses face, but also one of the easiest ones to address. A financial plan may sound overwhelming or confusing but it doesn't have to. It could be something as simple as outlining; what your goals are, how much you’d like to make, save, and spend, and creating a runway using your prices and packages to reach your desired income goal. Once you have a plan it’s time to make those numbers a reality. 

3. We can’t always control how much we make but we can control how much we spend.

Conducting an expense audit may help you eliminate or downgrade unnecessary expenses and put more money back in your pocket. If you don’t know where to start, an expense audit template is included in my free Mastering Cash flow Guide, you can snatch yours here.
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Have questions?

My name's Geily Romero and I'm the founder of Cutting Edge Financial Solutions. I’m passionate about helping service-based entrepreneurs, like you, take control of their finances and unlock sustainable growth. From cash flow management to financial planning, I offer a comprehensive approach that goes beyond basic bookkeeping, giving you the tools and insights you need to make informed decisions and increase your profits. If you're ready to move from surviving to thriving, I'd love to help! And thanks again to Matthew for inviting me to take over the blog. Here's to mastering your cash flow!