{"id":10553,"date":"2022-12-25T00:00:14","date_gmt":"2022-12-24T18:30:14","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=10553"},"modified":"2025-05-05T14:33:58","modified_gmt":"2025-05-05T09:03:58","slug":"cash-flow-management","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/","title":{"rendered":"Cash Flow Management: Manage Cash Flow Better with Strong Accounts Payable Software"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Cash flow is the lifeblood of a business, especially small to medium-sized enterprises. Some studies suggest that small businesses cite cash flow as one of their top 5 challenges. Hence, it is crucial to understand what cash flow is and how it can be managed.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This article will walk you through cash flow management and also detail how strong accounts payable software can help you plan better. Let\u2019s get started!<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d0e7b6bd1fa\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d0e7b6bd1fa\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#What_is_cash_flow\" >What is cash flow?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#What_is_cash_flow_management\" >What is cash flow management?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#Example_of_cash_flows\" >Example of cash flows<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#Positive_cash_flow\" >Positive cash flow<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#Negative_cash_flow\" >Negative cash flow<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#Why_is_cash_flow_management_important\" >Why is cash flow management important?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#How_to_forecast_manage_cash_flow\" >How to forecast &amp; manage cash flow?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/cash-flow-management\/#How_strong_and_agile_accounts_payable_software_like_RazorpayX_helps\" >How strong and agile accounts payable software like RazorpayX helps<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_cash_flow\"><\/span><span style=\"font-weight: 400;\">What is cash flow?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Cash flow refers to the amount of cash coming in and going out of your business. In other words, the cash movement within your company is known as cash flow.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Any cash that comes in is called a cash inflow, whereas any cash that goes out is known as a cash outflow. When the cash inflow is more than the cash outflow, there is a net cash inflow which is called positive cash flow and vice versa.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_cash_flow_management\"><\/span><span style=\"font-weight: 400;\">What is cash flow management?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Cash flow management is the process of maintaining your business&#8217;s cash flows by tracking, analysing, monitoring and optimising the cash that comes in and goes out of the business. In simple words, it analyses the net cash flows by deducting expenses from the total receipts.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Managing your business cash flow is important as it helps you ensure that there is enough cash to carry out your day-to-day operations and cover expenses like debt, salaries and <a href=\"https:\/\/razorpay.com\/blog\/what-is-invoice\/\">invoices<\/a>. It also helps you identify finance-related problems and solve them as and when they occur.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Example_of_cash_flows\"><\/span><span style=\"font-weight: 400;\">Example of cash flows<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Cash flows can be either positive or negative. When the income is more than the expenses, it is called a positive cash flow.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Similarly, when the expenses are more than the income, it is known as a negative cash flow. Here\u2019s an example to help you understand it better.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Positive_cash_flow\"><\/span><b>Positive cash flow<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The following is a cash flow statement of a small business that sells car equipment online. It shows the incoming cash flow and outgoing cash flow.\u00a0<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Operations<\/b><\/td>\n<td><span style=\"font-weight: 400;\">\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cash receipts from customers<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Rs.80,000<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cash paid to external sources for customer service<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Rs.50,000 (this money is paid by the business so let\u2019s consider it negative for understanding)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">-Rs.50,000<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Investing<\/b><\/td>\n<td><span style=\"font-weight: 400;\">\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cash receipts from the sale of a vehicle<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Rs.10,000<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cash paid for product maintenance\/equipment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-Rs.15,000<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Financing<\/b><\/td>\n<td><span style=\"font-weight: 400;\">\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cash paid for loan payment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">-Rs. 20,000<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Net change in Cash<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Rs. (80,000 + (-50,000) + 10,000+ (-15000) + (-20,000)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">= Rs. 5000<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p><strong>As you can conclude, there has been a net increase in cash (Rs.5000) and so this is positive cash flow because the business brought more income than it paid expenses.<\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Negative_cash_flow\"><\/span><b>Negative cash flow<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Similar to the above table and example, if we change the amount of \u2018cash receipts from customers\u2019 in the first row to Rs. 70,000 the net change in cash will come out to be (-Rs. 5000) i.e., there will be a net decrease in cash. This will be called negative cash flow because the business paid more expenses than it brought income.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now that we\u2019re clear with the basics, let\u2019s have a look at why cash flow management is so important for your business.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_is_cash_flow_management_important\"><\/span><span style=\"font-weight: 400;\">Why is cash flow management important?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Cash flow management is crucial to the success of any company. If your expenses are higher than your income for a prolonged period, your business will suffer a severe cash crunch.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here are some of the reasons why cash flow management is important:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Helps business continuity<\/b><span style=\"font-weight: 400;\">&#8211; An adequate amount of cash is a necessity for every business as it helps you carry out the day-to-day activities, pay vendor invoices, and other small expenses. <\/span>Having negative cash flows for a prolonged duration can not just have a negative impact but can even shut down your business. This is especially true for small businesses, which need more capital to cover the lack of positive cash flows.<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Establish investor trust<\/b><span style=\"font-weight: 400;\">&#8211; Good cash flows not only help you stay in business but also help establish trust among investors. Positive cash flows ensure that their money is in safe hands and the company&#8217;s future is stable.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Proper utilisation of funds<\/b><span style=\"font-weight: 400;\">&#8211; Proper management of cash flows also helps ensure that all the funds are utilised efficiently. The management can constantly review the cash management policy and make amends accordingly.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cut down on unnecessary expenses<\/b><span style=\"font-weight: 400;\">&#8211; Cash flow management involves the time-to-time review of the cash flows. If you have negative cash flows, you can review your expenses and try to cut down on unnecessary ones to improve your cash flow.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Facilitates decision-making<\/b><span style=\"font-weight: 400;\">&#8211; The cash flow situation of your company also helps you make better decisions. For example, if you can maintain positive cash flows and high liquidity, you can extend more credit to your suppliers and vice versa.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"How_to_forecast_manage_cash_flow\"><\/span><span style=\"font-weight: 400;\">How to forecast &amp; manage cash flow?\u00a0<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Here are a few steps that can help you forecast and manage your cash flows:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-10555 size-large\" src=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/blog-content\/uploads\/2022\/12\/Cashflow-Steps-1-1024x950.png\" alt=\"cash flow management\" width=\"1024\" height=\"950\" srcset=\"https:\/\/blog.razorpay.in\/wp-content\/uploads\/2022\/12\/Cashflow-Steps-1-1024x950.png 1024w, https:\/\/blog.razorpay.in\/wp-content\/uploads\/2022\/12\/Cashflow-Steps-1-300x278.png 300w, https:\/\/blog.razorpay.in\/wp-content\/uploads\/2022\/12\/Cashflow-Steps-1-768x712.png 768w, https:\/\/blog.razorpay.in\/wp-content\/uploads\/2022\/12\/Cashflow-Steps-1.png 1200w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Estimate your revenue and sales<\/b><span style=\"font-weight: 400;\">&#8211; Estimate all your upcoming incomes and expenses. Also, decide the period for which you want to make the estimate.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Set a budget<\/b><span style=\"font-weight: 400;\">&#8211; Depending on your estimated income and expenses, decide your business\u2019s budget. This will help you make better financial decisions.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Keep records<\/b><span style=\"font-weight: 400;\">&#8211; It is crucial to keep a record of all your transactions as this helps you track the company\u2019s performance and compare it with the data from previous years.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Review your spending regularly<\/b><span style=\"font-weight: 400;\">&#8211; Review your spending regularly to keep a check on your expenses. This will help you cut your costs and reduce unnecessary expenses.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Increase your sources of income<\/b><span style=\"font-weight: 400;\">&#8211; Reducing your expenses might not be enough to maintain a healthy cash flow. Also, look out for ways to increase your revenue.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"How_strong_and_agile_accounts_payable_software_like_RazorpayX_helps\"><\/span><span style=\"font-weight: 400;\">How strong and agile accounts payable software like RazorpayX helps<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_CashflowManagement\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">RazorpayX<\/a>\u00a0reimagines money flows and simplifies vendor management, invoices, and payments for businesses.<\/span><\/p>\n<p style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/vendor-payments\/?r=blog_cta_CashFlowManagement\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX Vendor Payments<\/a><\/p>\n<p><span style=\"font-weight: 400;\">Here\u2019s how <\/span><span style=\"font-weight: 400;\">RazorpayX Vendor Payments<\/span><span style=\"font-weight: 400;\"> can help you:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Estimate future cashflow needs &#8211; <\/b><span style=\"font-weight: 400;\">\u00a0Our carefully crafted product lets you estimate your future cashflow needs with extensive <a href=\"https:\/\/razorpay.com\/blog\/what-is-invoice-management\/\">invoice management<\/a> and real-time dashboard tracking.<\/span><\/li>\n<li aria-level=\"1\"><b>Invoice scheduling- <\/b><span style=\"font-weight: 400;\">RazorpayX Vendor Payments also lets you maintain cash flow through its feature of automated scheduling of invoices on due dates.<\/span><b>\u00a0<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Easy sourcing of invoices<\/b><span style=\"font-weight: 400;\">&#8211; RazorpayX allows you to add invoices to the software in multiple ways. This helps you track your vendor payments.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Auto-capture invoice details<\/b><span style=\"font-weight: 400;\">&#8211; It saves you from doing manual data entry by auto-capturing the invoice details and saves you from paying more than once, thus streamlining your cash flow management.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Automatic deduction of TDS<\/b><span style=\"font-weight: 400;\">&#8211; Add the TDS category of the vendors, and RazorpayX auto-calculates the TDS amount and deducts the TDS for every invoice.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Quick and seamless reconciliation<\/b><span style=\"font-weight: 400;\">&#8211; It provides you with seamless <a href=\"https:\/\/razorpay.com\/learn\/what-is-reconciliation\/\">reconciliation<\/a>. This helps you track your cash flows and reduce your expenses.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/x.razorpay.com\/auth\/signup?r=blog_cta_CashFlowManagement\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Sign up in 2 easy steps!<\/a><\/p>\n<p><span style=\"font-weight: 400;\">While cash flow management is crucial to the success of your business, manual cash flow management can be stressful. If you are also struggling with managing your cash flow and feel like it&#8217;s too much work, RazorpayX VendorPayments is the perfect solution for your needs.<\/span><\/p>\n<p style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/x.razorpay.com\/auth\/signup?r=blog_cta_CashFlowManagement\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Try it for free!<\/a><\/p>\n<p>90% of India&#8217;s tech startups are on RazorpayX because they know time is money and RazorpayX lets you save both with smart automation.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cash flow management is the process of maintaining your business&#8217;s cash flows by tracking, analysing, monitoring and optimising the cash that comes in and goes out of the business.<\/p>\n","protected":false},"author":79,"featured_media":10556,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[393,391],"class_list":{"0":"post-10553","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking","8":"tag-cash-flow-management","9":"tag-vendor-payments"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/10553","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/79"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=10553"}],"version-history":[{"count":4,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/10553\/revisions"}],"predecessor-version":[{"id":22395,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/10553\/revisions\/22395"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/10556"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=10553"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=10553"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=10553"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}