TweetChat: Better Cash Flow Management Means Playing Better Defense

By on April 8, 2013

On Wednesday, March 20th I was honored to host the first monthly PEX Card TweetChat on Twitter. If you aren’t familiar with TweetChats, they are organized, virtual discussions on Twitter around a specific topic. Participants can follow the discussion, and provide comments, by searching for #PEXCardChat, a unique hashtag which shows only those tweets associated with our discussion.

The initial TweetChat was a great success. Almost 50 participants joined PEX Card CEO Toffer Grant and me to talk about cash flow and small business. The discussion was lively and filled with excellent advice from both Toffer and the participants.  Below is a summary of my Q&A with Toffer Grant in #PEXCardChat.

TweetChat Discussion Summary:

Brian: What should the term cash flow mean to small business owners?

Toffer: It should initially prompt thoughts on revenue, but really the expense side plays a more critical role in making money. This is especially true in a volatile economy when revenue is harder to get and customers miss payment due dates. With T&E expenses between 8-12% of total revenue, better management of the expense side goes right to net profit line. This means there is more money to take home.

Brian: Why is it so hard for small business owners to properly manage their cash flow?

Toffer: There are two main reasons. First, the economy is tough to predict these days. Second, clients are taking longer to pay their invoices. When invoices are past due, there is a ripple effect both internally & with vendors.

Brian: Most small business owners focus on the “inflow.” Why is that a mistake?

Toffer: By inflow, you mean sales or revenue which can be more time consuming than thinking about how money is flowing out. When a business is in trouble, most owners think additional sales are the answer. That’s a common misperception. There has to be a balance of time between inflow and outflow. Determine what it will cost to run your business (outflow) and match expenses with revenue numbers. Adjust each accordingly throughout the year to keep your balance.

Brian: On the outflow side, how can business owners manage their cash more efficiently?

Toffer: Look at next six months and be honest about what it will cost to run the business. Make sure you include money to pay yourself. Review and adjust the numbers at the end of every month. Find the right combination of services, spreadsheets, and policies to stay on the budget you set.

Brian: How much time should business owners dedicate to their financials?

Toffer: I suggest all business owners start with manual number crunching so they can learn the important numbers. When it starts to take longer than 40 hours/month, look for a service or a simple software application to automate the process.

Brian: What should business owners do about contingency planning for cash flow (e.g. natural disaster or client goes out of business)?

Toffer: Most business owners should include two critical steps in contingency planning for their business. First, they should create a six month forecast for revenue and expenses (what do the next six months look like on a rolling basis). Second, they should build cash reserves to meet the requirements of the next six months. The reserves won’t materialize overnight so it’s best to start building now.

Brian: Are there resources to help small business owners interested in improving their cash flow management?

Toffer: The best resources are usually mentors and advisors who have the experience and expertise to help a business owner with cash flow management. Collaboration is key. PEX Card is also a great resource for businesses with mobile workforces looking to properly manage their cash flow.

Brian: What cash flow reporting documents are essential for small businesses and how often should they be run and reviewed?

Toffer: Three critical reports are: Revenue Forecast, Aging Receivables (& collections if necessary), and Six Month Revenue/Expense Forecast. I strongly recommend that a business owner review these documents monthly.

Thanks Toffer for the sage advice on helping small business owners better management their inflows and outflows.

If you would like more information on PEX Card, please visit their web site I you have any questions or would like information on future #PEXCardChats, you can email me ( or find me on Twitter (@BrianMoran). We hope you can join us in April for our next TweetChat.

About Brian Moran

Prior to rejoining the world of entrepreneurship, Brian was the Executive Director of Sales Development at the Wall Street Journal where he oversaw the sales development and marketing programs for the financial and small business categories among the many Journal brands. From 2002-2010, Brian was President of Veracle Media and Moran Media Group.

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