Whether you’re a self-employed freelancer or contractor, or a small business owner, understanding your cash inflow is vital to managing your business finances.

In this post we’ll explain what cash inflow is, explore some inflow of cash examples, and discuss how tracking your cash inflow can help you secure your business’s long-term success.

What is Cash Inflow?

To explain cash inflow, first we need to explain cashflow. The term “cashflow” refers to the full amount of all your business’s income and all of your business’s expenses. So, cash inflow is any money that comes into your business and cash outflow is any money that leaves your business. In other words, your expenses.

Understanding Cashflow

If you want your business to survive and thrive, then you need a positive cashflow. This means that you want more money to flow into your business than flows out. You always need to earn more than you spend.

Yet while a positive cash flow will help your business stay afloat, if you want your business to grow, you’ll need to invest – in new equipment, in marketing, in new products and projects, and so on.

This is why it’s vital to keep good business records. Monitor your cash inflow and outflow and you can ascertain how much cash you need to stay in business, along with how much cash you have leftover to invest back into your business.

Inflow of Cash Examples

• Income from sales of your goods or services. The total amount you make from sales in a given period is known as your net sales figure, or your turnover.
• Returns on investments. Many business owners invest in assets or stocks as a means of maintaining a positive cash inflow.
• Financing. Certain financial activities can contribute to a positive cashflow, including issuing bonds, selling treasury stock, or taking on a business loan.
• Interest. Money in your business bank account may accrue interest over time.

Outflow of Cash Examples

• Operating expenses. Rent on your business premises, bill payments, staff salaries, tax payments, and other overheads. These expenses can make cash inflow a little harder to calculate. For example, if your business relies on selling products, then technically for every sale you make you’ll be spending money on stock, raw materials, delivery costs, and so on.
• Liabilities and debts. For example, you might pay interest rates on business loans, and your business might have to manage certain long-term debt repayments.
• Reinvestments. This might include any money you spend on training and development, on research, on new equipment, and even on marketing.

How to Create a Cashflow Forecast

When you have a thorough overview of all the money that’s flowing in and out of your business, you can create a cashflow forecast. This is basically a prediction of how much money you’ll make, along with all of your expenses, over a set period.

A cashflow forecast allows you to effectively plan your business’s future growth. You can better manage any risks your business might face while also assessing how much money you can invest back into your business.

Read our full guide to creating a cashflow forecast.

How To Manage and Enhance Your Cashflow

As we mentioned above, your business’s survival and growth depends on maintaining a positive cashflow. You want your inflow of cash to exceed your outflow of cash. At some points, particularly when your business is just starting out, this may seem easier said than done. But there are some things you can do to keep on top of your cashflow situation:

• Invest. Don’t let your business stagnate. Invest in new advertising strategies, in new market research, in new products and services, in more efficient equipment, and in whatever else it takes to stay competitive and profitable.
• Consider working with a financial advisor to further boost your inflow with investments in stocks, companies, and other financial activities.
• Keep good records. The better you understand your income, your profits, and your expenses, the better you can plan your activities and make adjustments wherever necessary. Read our full guide to record keeping for freelancers and small businesses.
• Review your costs. What are your major expenses? Are there any areas where you can reduce your operating costs? For example, do you need pricey business premises, or can you run your business from home?

Are You Paying Too Much For Business Insurance?

Business insurance is also vital to your business’s long-term survival and growth. With comprehensive cover in place, you’ll be able to manage any risks your business might face, and you’ll be able to recover from any setback, big or small.

But far too many businesses pay far too much for cover they may not even need. You can’t afford to do without business insurance. But you might be able to make savings through switching your provider.

At Tapoly, we specialise in designing bespoke business insurance packages for self-employed freelancers, contractors, and small business owners. Get a free quote online in minutes.

If you have any questions, or you’d like to discuss your options, you can contact the Tapoly team at [email protected], call our info line on +44(0)207 846 0180, or use the chat box on our website.