Cash flow is the oil that keeps the machine, which is your business, running. Great management of the company’s cash flow is one of the cornerstones of a successful business.

Melbourne business coach David Guest has some important insights into the attributes needed for effective cash flow in a business. He lists three areas to develop when approaching cash flow for an organisation of any size: communication, judgement and expectations.

Communication

Effective communication is vital to a successful business. A business owner will have to communicate to a range of stakeholders from creditors about extensions due to cash flow issues, to employees needing to do mandatory overtime to achieve certain goals. A lack of communication means that your business will lose focus and become inefficient thereby compromising the daily running of the enterprise. A business where there are misunderstandings and a lack of communication will create issues for your customers and so affect your cash flow.

Judgement

Melbourne business coach David Guest says there are two distinctive types of judgement:

1. Thinking judgement

Thinking judgement leads to decisions based on logical or objective information. People who use this kind of judgement have personalities that like facts and don’t allow emotional factors to cloud their decision-making.

2. Feeling judgement

Feeling judgement leads to decisions based on how you or someone else feels. Managers who use this kind of judgment style are people that think about the way everyone will feel and be affected by a decision and tend to make decisions based on gut feeling or instinct.

Guest makes the point that a great manager will possess both of these traits and most importantly, know when to use each approach in response to the situation.

Expectations

Another aspect of managing a business’s cash flow is managing expectations.

There will be times when the business goes through lean times in terms of cash flow. As a business manager or owner, be aware of these times and plan accordingly. Set up a cash flow financial plan so you can predict when the flow of money tends to slow down during the financial year.

A person not paying their debts to you is one of the main causes of cash flow problems. To counter this, manage your debtors and make the expectations in the terms of payment clear to your debtors and stay in touch with your clients as payment deadlines move closer. You can offer small discounts for early payment to encourage bills to be paid on time and if your business does offer credit, communicate clearly the limits to your terms of credit.

Melbourne based David Guest also advises that if cash flow problems become overwhelming for you, a business coach can help you manage your cash flow more effectively.