What is the relationship between cash flow and sales?
Do you know how your sales team can impact financial results, or rather, what is the relationship between cash flow and sales? Analyzing this connection can bring valuable learning to those who have a business. But what are the best strategies in this regard? That’s what you’ll discover in today’s post!
First, let’s explain the relationship between cash flow and sales. Afterwards, you will see some tips to optimize the management of this tool and also your marketing strategies. Do you want to know more about the subject and improve the financial organization of your business? So, continue reading and check out this special content we prepared for you!
What is a cash flow?
If you are experiencing financial difficulties and need to improve the management of your company, cash flow can help. It is nothing more than a tool that will help you monitor your business’s finances .
Through entries, generally daily, it is possible to control the establishment’s expenses and income. With this, you have a map of the main aspects of the business, which will help to broaden your vision and optimize the company’s results.
The cash flow must include, for example, entries on taxes, payments made to suppliers, fixed expenses such as rent and also revenues obtained, whether through sales or another aspect.
It is advisable that you have good detail when setting up your cash flow. This makes it easier to understand the main information, find bottlenecks and points for improvement, in addition to the contribution margin of the products.
What is the relationship between cash flow and sales?
Cash flow is a fundamental element of the financial management of your business and corresponds to its inflows and outflows. The first involve any value that your company receives, whether through sales or investments. The second concerns all the money your company spends, whether on loans, suppliers, employees and other costs.
Understand what brings the most results for the business
By controlling cash flow, it is possible to understand which elements sell the most and which bring profits or losses. Therefore, it is viable to draw up strategies to solve what you identified as a problem or invest in what brings a good return.
In this sense, sales play a fundamental role in your cash flow. After all, they can balance inflows and outflows and help with expenses. With increased sales revenue, it is possible to invest more in your products and processes.
Improve deadline management
If you observe higher expenses, in addition to reducing costs, you can put together a better strategy to increase sales and balance cash flow. The deadline for negotiations can also affect you.
Therefore, when managing your company’s finances, you need to consider these payment deadlines and also the default rate. Efficient control of your cash flow allows you to clearly see business bottlenecks in this regard and adjust what is necessary in your sales. But what other actions can be effective to optimize the management and results of your cash flow? That’s what we’ll see next!
How important is cash flow for sales management?
Cash flow can generate several benefits for the sales management of your business. For example, through it, you have reliable data to understand the participation of each product in the establishment’s profitability. Therefore, it is possible to think of strategies to highlight it.
Furthermore, this tool can improve your company’s strategic planning , making it easier to create marketing campaigns that generate a good return. Another important point of cash flow is related to finances.
For example, by following it, it is easy to find good alternatives to keep your finances up to date. This means there is more money to invest in training, quality of service and ways to improve the customer experience .
Consequently, the probability of having satisfied and loyal consumers increases. With more people happy with your establishment, the costs of acquiring new buyers reduce. This way, it is possible to optimize profitability.
How to optimize cash flow management?
Now that you know what the relationship between cash flow and sales is, how about checking out some tips to improve your management? With the intention of helping your business, we have separated several important information. Follow along!
1. Make and analyze the DFC
The DFC is the Cash Flow Statement, a document in which you record all the business’s inflows and outflows. Thus, it allows you to carry out precise control of your cash flow and clearly see where the business bottlenecks are, in addition to identifying which products or services bring greater income to the company.
From this, it is possible to think of actions to promote sales of those items that are most advantageous. However, for the DFC to function as an efficient management tool, all inputs and outputs need to be recorded, avoiding calculation errors that will impact strategic business decisions. So, don’t miss anything and write everything down in the DFC.
2. Adopt a management system
Have you already adopted a management system to assist with cash flow and sales? It can be a good way to organize your business’s finances. But before adopting a platform like this, it is important to analyze the needs of your establishment.
Small businesses that are just starting out, for example, can have efficient financial management just with spreadsheets and simpler forms of organization. If you suffer from frequent calculation errors and notice that a lot of important information is lost, among other problems, it may be necessary to adopt a management system.
The advantage of platforms like this is the practicality they offer, because they automate processes, avoiding errors and rework, optimizing team productivity and improving sales results.
3. Control and organize your sales
Maintaining positive cash flow is a challenge for businesses. Therefore, it is essential to have a good sales organization to assist in this management. Even if the sales rate is good, the deadline for receipt is a point of attention for companies.
If you have fixed monthly costs, but sales vary a lot, this can represent instability in the business’s finances. That’s why it’s so important to have an accurate view of your sales and receipts . Here, the financial organization helps you evaluate what decisions need to be made to avoid a negative scenario for your cash flow.
4. Reduce defaults
Furthermore, defaults and installment payments can also compromise the final calculation of your cash flow. So, if in a period you were counting on a certain amount, but many customers are in default, this will harm the business’s finances.
At the same time, with good planning , it is possible to predict and prepare for this type of situation, adopting strategies that maintain cash balance. If, for example, you sell more than expected, you can use that money to cover the down months. So, write down all payment deadlines to have greater predictability about your finances each month.
5. Align with the team
To ensure efficient cash flow management, it is necessary to establish some guidelines with your team. If you adopt a specialized system, for example, the team needs to receive adequate training to deal with the new tool and fill in all the fields correctly, such as date or input and output values.
Additionally, arrange periodic meetings with the sales and finance teams to evaluate cash flow and sales reports and, thus, outline strategies for the future. The objective is to avoid a negative imbalance between the business’s inputs and outputs.
This way, you can think together about efficient measures to promote sales and deal with cases of default. After all, the team interacts directly with customers and can bring lessons learned about the behavior of these consumers to meetings.
6. Make financial planning
As you have seen, cash flow is an important instrument for your financial management to be successful. However, it is important to have other complementary actions that will help the efficiency of this tool.
In this sense, it is important to carry out budget and financial planning to ensure the longevity and growth of the business . To do this, categorize cash flow information, understand the main costs and revenues of the business, make projections and analyze the possibility of making new investments.
7. Create categories
Using detailed categories can be a great way to improve your cash flow management. The higher the number of ratings, the broader the vision for your company. However, to achieve this, it is important to have a system to automate releases.
Additionally, you can create divisions and subdivisions of both expenses and expenses. For example, it is possible to detail the company’s variable and fixed costs and, in a similar way, adopt recipes with as much data as possible.
This makes it simpler to understand the main revenue entry points and also the main subdivisions to which your money is going out. This makes it simpler to adopt measures to contain costs and maximize revenue, optimizing the profitability of the business.