Keep the money flowing

Part 2: Know Where Your Money is Going

While bringing in cash is essential, where that cash goes is just as important. Many business owners focus on sales and forget that spending matters too. Here are a few tools to help you better manage your outgoing funds: 

Budgets 

Budgets have been around forever—and for good reason. Most large companies use them, and small businesses can benefit as well. While creating a budget may seem time-consuming, it’s an excellent way to review your expenses and stay on track. 

If a strict annual budget feels too rigid, consider alternatives like: 

• Rolling budgets that adjust each month or quarter 

• Short-term spending plans 

• Cash flow projections (more on this below) 

Any version of a budget gives you better control and awareness of where your money is going. 

Cash Flow Projections 

Cash flow projections don’t need to be overly complex. A simple spreadsheet file can give you an overview of your expected inflows and outflows over the next few weeks or months. 

Start by listing your regular expenses for each period, then add periodic costs like quarterly taxes or annual software renewals. For cost-of-goods-sold (COGS) expenses, you can estimate them as a percentage of sales—just remember that these often hit before the cash from those sales comes in. 

Planning for large, infrequent expenses (e.g. insurance, annual subscriptions, replacement equipment like computers, annual license renewals, etc.) can help prevent cash flow surprises and ensure that critical obligations—like payroll—are covered. 

Detailed Bookkeeping 

If you're only keeping books for tax purposes, you're missing a huge opportunity to understand your business. Tax returns don’t require detailed expense breakdowns, but your P&L (profit and loss) statement should.

One common area of waste is software subscriptions. If all your tech costs are lumped into one line, you might not realize you're still paying for tools you no longer use. We often recommend clients create sub-accounts for major software or service subscriptions. This makes it easier to evaluate costs monthly, quarterly, or annually—and cut unnecessary expenses. 

Another key area is costs directly related to sales (COGS). This might include contractors, materials, merchant fees, or direct labor costs. These should be broken out on your P&L to help you assess gross margins before factoring in overhead. 

Simply put: the more detailed your bookkeeping, the easier it is to make informed decisions to improve the profitability of your business. 

Loans and Credit Cards 

Loans and credit cards have a place in business finance—but they also represent major outflows of cash. If you’re creating a cash flow plan, don’t forget to include loan and credit card payments. 

Using credit cards to float your business comes with high interest rates. While loans or lines of credit can help during short-term crunches, long-term dependence can hurt your business. 

Loans make sense when investing in long-term growth, like buildings or equipment. But if you’re regularly borrowing to cover payroll or day-to-day expenses, it’s time to take a closer look at your income and spending. 

Managing where your cash goes is just as vital as making sure it is coming in.  

A few simple tools—like budgets, projections, and detailed bookkeeping—can give you clarity and control. And if you need help getting started, we’re here to help.