Understanding Cash Flow: A Practical Guide for SMEs

Cash flow is the movement of money in and out of your business. A profitable company can still fail if cash isn't available when rent, payroll and suppliers need paying. Understanding the difference between profit and cash is fundamental for every director.

The three sections of a cash flow statement

• Operating activities, cash from day-to-day trading
• Investing activities, equipment, assets and disposals
• Financing activities, loans, equity and dividend payments

Warning signs to watch

Rising debtor days, over-reliance on a single customer, or consistently drawing on an overdraft can signal trouble ahead. Monthly management accounts with a cash flow summary help you spot trends early.

TAO prepares clear monthly packs that show where your cash is going and what's projected for the next 90 days, so you can act before a crunch becomes a crisis.