How To Better Manage Cash Flow During Rapid Business Growth

Exponential growth is the dream of every entrepreneur. Not only are periods of rapid business growth usually accompanied by more sales, but they can naturally also bring more customers, and perhaps even see an expansion of your workforce.

But as your company grows, keeping a close eye on your cash flow is crucial. This is primarily because business growth can also bring additional expenses as well as additional income streams. And the more your company’s money is moving, the greater the need to practice stringent cash flow management.

Thankfully, managing your company cash flow is easier than you may believe it to be – just as long as you have the right financial tools at your disposal. This means looking into the best business bank accounts to invest in for your business, as well as analytics tools to better optimise your cash flow and improve on your products, services, and perhaps even the efficiency of your sales funnel.

Don’t overestimate how secure your business is during times of rapid growth. Any periods that are lacking in balance have the potential to disrupt your business. And effective liquidity management during these vulnerable periods makes all the difference between triumph and failure. So let's dive in and examine a few strategies for balance sheet fortification.

Unpacking the importance of maintaining a strong cash flow

Cash on hand is the lifeblood of any business. If your business is in a position where it can always retain enough liquid capital to make strategic moves, then you’re naturally going to have a better chance of adequately responding to growth opportunities over your competitors. Having plenty of liquid capital that can be accessed at a moment’s notice can also help your business cover routine operating expenses, pay its suppliers, and even address unforeseen concerns and their expenses with minimal strain.

During periods of rapid business growth, your company will likely experience an influx of new customers and increased sales, as we mentioned previously. Whilst this feels like a dream come true on a surface level, these growth spurts can also be accompanied by increased expenditures. And it can be difficult to gauge just how much money you may be spending when following the possibility of generating greater profits down the line.

Whilst the old adage ‘you have to spend money to make money’ does have a ring of truth to it, if you're not careful with funding your business growth, your new expenses can quickly outpace your projected revenue. This in a nutshell, is precisely what makes cash flow management the single most important skill for entrepreneurs to hone as they prepare to scale their enterprises.

How to forecast funding requirements for your business

As you now know, it’s common for periods of rapid business growth to be accompanied by some unpredictability. Thankfully, with a little bit of preliminary financial planning, you can ensure that your business is equipped to handle fluctuations in revenue and expenses with minimal cause for concern.

The secret is to use analytics tools and consult with trusted financial advisors, investors, and other stakeholders to develop a cash flow forecast. In doing so, you’ll be able to identify any and all potential cash shortfalls well ahead of time (and perhaps even prepare contingency plans for these risks). Developing a cash flow forecast can also help business owners allocate their company resources with greater confidence, paving the way for strategic and highly organised business growth.

And best of all, by using data and financial analytics tools to develop your cash flow forecast, business owners can draw on insights derived from historical financial data (i.e. balance sheets from previous fiscal years) to analyse past trends. Whilst this may not sound overtly glamorous, analysing this historical data may allow your business to identify any patterns or seasonality to your cash flow that can further strengthen your cash flow forecast. The more accurate your forecast is, the higher the likelihood of experiencing a strong cash flow once your business growth strategies have been put into effect.