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My business is growing. How do I plan cash flow so I do not run out of money?

Profit and cash are different things, and this is where growing businesses get tripped up. You can have a profitable quarter on paper while your bank account is shrinking. The income statement says you made money, but the money has not actually arrived yet, and in the meantime you still have to pay everyone.

Growth consumes cash. When revenue goes up, you need to pay more workers, buy more supplies, and cover more operating costs before your clients pay their invoices. If your average client takes 30 or 45 days to pay, that gap between spending and collecting gets wider as the business gets bigger. The faster you grow, the more cash gets tied up in receivables.

For service businesses, receivables are usually the main cash trap. You finish a job, send the invoice, and wait. Meanwhile you already paid your crew for the hours and bought the materials. The profit exists on paper but the cash is sitting in someone else’s pocket until they pay.

Building a simple cash flow forecast helps you see what is coming. Start with your current bank balance. Add the cash you expect to collect over the next four to eight weeks based on outstanding invoices and your typical collection timing. Subtract the bills and payroll you know are due. What is left is your projected cash position.

Run this forecast weekly or at least every two weeks. The point is not precision. The point is catching problems before they become emergencies. If the forecast shows you getting tight in week six, you have time to push a big expense, follow up on slow-paying clients, or draw on a credit line. The forecast is only as good as the numbers you put into it, which is why accurate monthly bookkeeping is the foundation for this kind of planning.

Know your runway. How many weeks can you cover payroll and essential bills with the cash you have right now? If the answer is less than four weeks, you are operating on thin margins. Six to eight weeks of runway gives you enough cushion to handle a slow month or an unexpected expense.

Time your big purchases around your cash flow. Equipment, vehicles, and large deposits should happen when you have the cash to absorb them without putting pressure on payroll or vendor payments. This sounds obvious but it is easy to commit to a $15,000 truck payment right before a slow period.

Line up financing before you need it. A business credit line is easier to get when your books are clean and your business is healthy. If you wait until you are desperate for cash, the terms will be worse and approval is not guaranteed. Talk to your bank when things are going well and have the line in place for when you need it.

For owners who want a more detailed forecast or help thinking through the financial side of growth, a fractional CFO can build the model and meet with you regularly to review it. That level of support makes sense when the business is growing fast enough that the financial decisions are getting more complex.

If you are growing and want help getting a cash flow forecast in place, reach out for a consultation. Every business has different timing and pressure points, and the specifics matter.

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Massachusetts bookkeeping and accounting firm helping service businesses across New England and nationwide. We go beyond recording transactions to show owners what their numbers actually say about their business. Founded by Simona Leppala, a CPA and Enrolled Agent.

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