The ins and outs of cash flow management
How you spend your incoming and outgoing money requires diligence and careful management. After all, you want to stay on top of your finances to ensure you aren’t spending more than you’re making.
It may not sound sexy, but effective cash flow management can help you manage what’s coming in and ensure it’s spent wisely.
What is cash flow management?
Cash flow management is the process of tracking and managing the money that comes in and out of your account.
This financial management process can help you better predict how much money you will have in the future. It also helps to successfully you meet your financial commitments and address any ongoing issues within your flow. Cash flow management can help with overspending and uphold your financial health.
What mistakes do people make with cash flow management?
Good cash flow management is vital, however it’s an area where many people fall down. Some common mistakes people make include:
- Not knowing where money is going – If you don’t have the full picture of where your money is being spent, it’s hard to know where the gaps are and where it could be better used.
- No safety net – Creating a cash cushion for occasions when money is tighter can give you peace of mind. It could make the difference between a minor shortfall and serious financial ruin.
- Short-term thinking – If you’re only thinking in the immediate future and not planning ahead for the mid to long-term, for example, with investments such as shares or property.
Cash flow mismanagement can be hazardous to your emotional and financial wellbeing – both now and in the future.
What are the consequences of poor cash flow management?
If you’re making missteps in your cash flow management, you could experience a range of unpleasant consequences.
If you don’t know where your money is being spent, any unwelcome surprises (e.g. medical expenses) could emerge and hurt your overall financial position. Ensure you have the full picture and plan, plan, plan to anticipate and prepare for any of life’s hurdles.
Poor cash flow may result in you missing out on opportunities that could benefit you in the bigger picture, such as investment in the property market.
Living without foresight and a clear financial path ahead can be highly stressful. Cash management could help you transform your finances from stress to a source of joy and security.
Making your money work for you
It’s never too late to reach your true financial potential. With the right tools and information, you could make your finances work for you – not the other way around.
Contact the Advantage Consulting team to learn more about taking control of your finances.
This is general advice and has been prepared without taking into account your particular situation or needs. You should consider whether it is appropriate for you before acting on it.