Blog Layout

What's the Story on Cashflow?

February 10, 2021

Business owners are sometimes confused about the difference between profit and cashflow. In this article, GroForth’s Geraldine explains:


• What is cashflow?

• Is cashflow the same as liquidity?

• How is cashflow different from profit?

• What are the different types of cashflow?

• What is positive cashflow?

• What is cashflow quality?

• What does cashflow measure?

• What do cashflow and liquidity tell investors?

• What is the difference between a cashflow statement and a cashflow forecast?

• Why is cashflow management important?

• How you can improve cashflow

• Who controls cashflow?


Managing cashflow correctly is one of the best ways to improve your business performance. This is because when cashflow is positive, you have money available to pay your bills and keep your business running smoothly. Positive cashflow also puts you in a strong position when it comes to financing future development and growth.


On the other hand, when cashflow is weak, it can be difficult to pay staff and bills on time. Running low on cash can be a warning sign that your business is in trouble.


So, because cashflow is such a good indicator of the financial health of a business, it’s an area that accountants often focus on. Yet, in my experience, many business owners don’t fully understand cashflow and are sometimes confused about the difference between cashflow and profit. So, set out below are answers to 12 frequently asked cashflow questions.



1. What is cashflow?

Cashflow refers to the money that flows in and out of your business through normal day-to-day activity. On your cashflow statement, the money that comes in (eg payments from customers) is shown as a positive number, while the money that goes out (eg payments for utilities and services) is shown as a negative. 



2. Is cashflow the same as liquidity?

Liquid assets are assets that can be easily converted to cash like the money you have in your safe, cash in your bank accounts and money owed by customers that you know you can collect quickly. Cashflow can be used to measure liquidity.


3. How is cashflow different from profit?

Profit focuses on when income earned (eg when a sale is made) but cashflow focuses on when payment is received. You might invoice a customer in March but the customer does not pay until April so there is gap between when the income is earned and the payment received. Also, unlike profit, cashflow includes the money that flows out of your business (eg expenses such as the cost of sales, capital expenditure, depreciation, interest and dividends) so it is sometimes regarded as a better indicator of your company’s health because it gives a fuller picture of your business.


4. What are the different types of cashflow? 

There are three types of cashflow:


⁃ Operating eg sales

⁃ Investing eg dividends and interest

⁃ Financing eg loans


5. What is positive cashflow?

Positive cashflow is when you have more money coming in than going out. It means that you have sufficient cash available to pay your staff and bills on time and that you can readily finance the purchase of essential equipment. It also means that you are in a good position if you need to raise finance to expand and/or develop your business.


6. What is cashflow quality?

Cashflow quality takes into account both the factors that impact your current orders and market and customer trends that may impact your future orders. For example, if your current orders depend on a one-off large order that is unlikely to be repeated or if the value of the order does not cover the cost of servicing it, this would be ‘low quality’ whereas a reliable stream of cost-effective future orders would be high quality.


7. What does cashflow measure? 

Cashflow measures how quickly assets can be converted to cash without affecting their price.


8. What do cashflow and liquidity tell investors?

Cashflow and liquidity indicate how quickly a company can meet its financial obligations.


9. What is the difference between a cashflow statement and a cashflow forecast?

A cashflow statement shows historic cashflow information. A cashflow forecast predicts future cashflow.


10. Why is cashflow management important?

Cashflow management monitors the financial health of your business and shows how much cash you need on a day-to-day basis. It can be used to work out how to reduce cash outflows as well as to ensure you can access finance for ongoing business development.


11. How can I improve cashflow?

An effective way to improve cashflow is to speed up cash inflows and slow down outflows. Here are some ways that you can do this:


⁃ Invoice promptly

⁃ Make it easy for your customers to pay

⁃ Credit check new customers

⁃ Chase money that you are owed

⁃ Don’t hold too much stock


12. Who controls cashflow?

Technology, particularly cloud accounting, make it easier than ever to keep on top of your company’s cashflow management but financial skills are also crucial. Key players on your cashflow management team should include the people responsible for your accounts payable and accounts receivable functions. Usually, this will be either an in-house Finance department or an outsourced finance service provider like GroForth. 


Cash, as they say, is king. If you have questions about cashflow or would like advice on how to improve your cashflow management, GroForth can help. Contact our cashflow management team for details.

GroForth Blog

March 11, 2025
Lessons learned during the Covid-19 lockdown could lead to lasting changes in some accounting firms, says Sarah Daly. For the last few months, accounting firms across Ireland have been forced to work from home due to Covid-19 social distancing requirements. While firms that already use technologies like cloud accounting have managed the transition reasonably smoothly, others have had to adapt their processes and procedures rapidly in order to cope. How technology helps improve productivity in accounting firms: As an early adopter of technology ourselves, GroForth understands the benefits that IT can deliver. So, it came as no surprise to us that cloud-based applications were a key enabler of working from home for our accounting firm clients in recent months. Software products like Xero and SortmyBooks are real time-savers in busy accountancy practices at the best of times, but their 24/7, ‘work anywhere’ functionality really came into its own when the pandemic forced firms and their clients to work from home. Likewise, accountants are finding that applications like Zoom, Skype for Business, Microsoft Teams and Slack enable them to support their customers online while teams can communicate and collaborate effectively in real time. Admittedly, with more people than ever working from home, there have been challenges when it comes to ensuring staff have access to suitable equipment and controlling and securing remote set-ups, but accounting firms are not the only ones facing these challenges. Generally, firms are willing to seek out solutions and adapt rapidly and, when it comes to workers, a recent study by the Whitaker Institute found that more than three-quarters (78%) would like to continue to work remotely after the crisis is over. How working from home boosts productivity: Another interesting lesson from the Covid-19 working from home experience is that remote working appears to boost productivity for some employees. There are several reasons why this is the case. Less time spent commuting: Various studies have shown that long commutes are stressful for employees, so it is not surprising that eliminating commuting is one of the factors that helps boost productivity. Less time spent commuting also means that workers have more time to enjoy leisure activities so there can be a strong personal incentive to complete work faster. More time spent working: When employees work from home, they may take fewer breaks, or shorter breaks. This, combined with less commuting time, means employees often log longer hours when working from home. Improved concentration: While not all workers have a suitable home environment, those that do find it quieter than working in a busy office. This helps improve concentration and focus which, in turn, enhances productivity. Better work/life balance: Simple things like being able to exercise during the day, do the shopping or put on a load of washing at lunchtime, can contribute to a better work/life balance. This can help employees feel less stressed out by conflict between their home and work responsibilities. Reduced absenteeism: Firms also say that their employees appear to have fewer sick days when working from home. Of course, not everyone is more productive. For some workers, their home environment is simply too small. Others dislike the isolation and miss the social aspect of being in the office. Variables like having young children can limit productivity as employees may be tired or stressed from having to work before children get up or after they go to bed. But, for the most part, GroForth clients find that the benefits of working from home outweigh the disadvantages. What’ s more, accounting firms are telling us that their employees appear more positive and productive because they feel their work/life balance has improved. Strategies to improve productivity: On a personal note, one practical tip that helps me improve my own productivity is exercising early in the day. I find this is energising and helps me stay positive. If you are lucky enough to have more time on your hands than usual at present, another practical tip is to use this time to benefit your business. I recently shared some ideas on how to do this in an this article on using time wisely when working from home. As well as working to improve your personal productivity, there are practical steps you can take to help your employees be more productive while working from home. These include: Recognising that employees may be experiencing conflict between work and home life if they have young children at home or are looking after older relatives. If you are willing to be flexible—for example, by allowing employees to work outside of normal office hours—this can help improve their productivity. Ensuring teams have adequate equipment and support Encouraging team members to set up a dedicated work space in their home Encouraging team members to schedule their work time, take regular breaks, and set boundaries so that work does not encroach on personal time Organise regular check-ins with team members Set clear goals, monitor performance and provide feedback While working from home is likely to continue indefinitely for many workers, some employees will need to return to the office. My colleague, Nikki Johns recently discussed this in article on the Government’s Return to Work protocol. Finally, remember to be kind to your employees and yourself. Don’t beat yourself up if you find it difficult to get time to work on your business development and strategy at present. Time constraints are a huge challenge for partners and managers in many firms. Indeed, research recently conducted for GroForth found that this is the single biggest problem accountancy practices face. Outsourcing can be one way to free up time and enhance productivity. As a provider of specialist services for accounting firms, GroForth has seen increased demand for our services since the Covid-19 pandemic began.  If you’d like information about these services or would like to know more about how GroForth is helping firms like yours, please get in touch.
December 12, 2024
Feedback from potential clients can provide valuable information for improving your products and services as well as highlighting opportunities to boost your revenue. Yet many businesses fail to manage their pipeline effectively and miss out on these opportunities as a result. Your sales pipeline is an important source of information for planning and budgeting. So, when working out your budgets and forecasts for the new year, it is important to make time to review your pipeline and see if you can identify ways to improve it. Key questions to ask include: What do you expect to sell next year? To whom? When? At what price? What volume? You also need to look at your input costs. To what extent will these be affected by inflation? Do you have sufficient people/resources to deliver your products/services or will you need find additional capacity? If so, how will you fund this? Impact of uncertainty on your sales pipeline Uncertainty is a huge factor at the moment because of the upheaval business experienced over the last 18 months. Have any of your prospects disappeared due to the impact of the Covid-19 pandemic, Brexit, or other external factors? Have any new prospects emerged? Are you still targeting the right customers? Do you have any new competitors? These are all questions to think about when you are working on this year’s budget and plans. Realistic forecasts It’s important to be realistic when forecasting. Your forecast should be based on the sales that you are confident you can secure in a given time period. Remember to assign responsibilities, monitor progress, and keep a keen focus on controlling your input costs. Accounts and payroll information While your sales pipeline is an important source of information for planning and budgeting, accurate bookkeeping and payroll information is also crucial. It’s important to ensure that there is a good flow of communication between your bookkeeper and accountant. This is because while your accountant is usually the one person who really understands your business, they rely to a great extent on the information you provide to them. So, if this information is incomplete, inaccurate or out of date, it will affect your accountant’s ability to help you. If you need support or advice on how to improve your bookkeeping and payroll processes, contact GroForth for assistance. Finally, remember neglecting your pipeline is a missed opportunity. So the lesson is, stop ignoring your pipeline!
December 12, 2024
If you intend to change your payroll service provider, there are some practical steps that will help you achieve a smooth transition, says Michelle Collins The end of the year/beginning of a new year is probably the best time to change your payroll provider. But before deciding to make a change, it’s important to establish if your existing supplier knows that they are not meeting your requirements. Have your spoken to your existing payroll provider about the problems you are experiencing? If your existing payroll company has been providing support for a period of time, it’s likely that they have a reasonably good understanding of your business. So, if they are not delivering the services that you require, it could be that they don’t realise their offering doesn’t match your expectations. It is worth having a conversation with them to find out if they can up their game. However, if they don’t have the skills or capacity that you require then you probably need to switch to another company. Timing the switch correctly Usually, the end of the year is the best time to make the change as the initial set up will be less time consuming for the new provider. Getting the timing right is very important. (See our previous blog on choosing the right time to change your payroll provider). Checklist for switching your payroll provider Once you make up your mind to switch, there are a number of practical steps to take in order to achieve a smooth transition. Here is a checklist of seven key points to cover: Check the contract with your existing provider. What is the notice period? Are there any exit fees or penalties? Are there any other conditions you need to comply with? Research potential providers. Check that they are properly qualified to deliver the services that you require. Questions to ask include: Can they provide all the services that you need? Do they have adequate staffing and resources to cope during busy periods or when a staff member is absent or ill? What payroll software do they use? Is it compatible with your software and systems? Do they have adequate data security measures in place? Will they provide a dedicated contact for your business? How will they cope if your business requirements increase or change in the future? (This can be very important if your business is growing and your payroll is likely to expand). How will they liaise with you and your team? Will they liaise with Revenue on your behalf? Make a list of any software or apps that you use which integrate with your payroll process. You may need to allow time to make changes to these in order to keep things running smoothly. Once you have a shortlist of potential future providers, check how their services compare with your existing provider. This will help you to confirm that their offering is a better fit for your business requirements. When you select your new provider, you will need to find out what information they require from your existing provider. Collect all relevant information before switching as this will help avoid problems down the line. Choose the right time to notify your current provider that you are switching. When everything is in place, you then need to notify your employees so that they know that they will be receiving email and/or other communication from the new provider. Your employees may also require training on the new system depending on how it interacts with your existing systems for things like recording annual leave, overtime, commissions, sick absences, etc. Payroll problems can be very time consuming when systems do not run smoothly so it is worth taking the time to choose the best possible provider. Changing to a new payroll company is a good opportunity to resolve existing problems and get a service that fully meets your needs. For information on the payroll supports that GroForth provides, please check our Payroll Services page or contact me to request a quote.
December 2, 2024
Those quiet days at the end of the year can be a great opportunity to do a bit of administrative housekeeping. It might seem boring but you’ll thank yourself when you’re doing your tax return next year! Here are five suggestions to get started: Run an eye over your 2024 purchases to check everything is recorded and correctly coded. Now is the time to chase any missing documentation, fix errors and get everything ship shape for your accountant. Review what you spent in 2024 and use this information to help you budget more accurately for 2025. Check what you are owed and work out where you need to follow up on late payments. If you hate chasing customers, consider letting our credit control team do the chasing for you. Look for opportunities to streamline processes. Consider outsourcing non-core functions like payroll and accounts if this could free up staff time for higher value activities. Evaluate the information that you get from your existing systems. Is it helping you to manage your business or is it taking up too much time and just generating administrative headaches? Many GroForth clients say their profitability improves when we prepare monthly management reports and data analytics for them. If you’re not already availing of this service, contact us for details.  We always say that the time you invest in reviewing your business is never wasted. Indeed, it often highlights opportunities to save money and improve profitability. If you are interested in finding out more, drop us an email and we’ll be happy to explain how our team can help you streamline administration and boost efficiency in 2025
October 2, 2024
Yesterday marked the 1st of October, the official starting point for Q4 and budget day 2025. During the course of yesterday afternoon, Minister for Finance, Jack Chambers and Minister for Public Expenditure, Paschal Donohue announced a series of measures directed at “putting the country on a firm footing for the future”.  Below is a summary of the key announcements related to business operations that you should take note of: Income Tax: The Universal Social Charge (USC) will be reduced from 4% to 3% on incomes of €25,000 to €70,000. Entry threshold to 3% rate increased by €1,622 to €27,382 The national minimum wage will increase by 80 cent to €13.50 per hour from the 1st of January 2025 The main tax credits - Personal, Employee and Earned Income Credits - will increase by €125 The Standard Rate Cut Off Point will increase by €2,000 to €44,000, with proportionate increases for married couples and civil partners For Capital Gains Tax (CGT) Retirement Relief, the higher age limit will stay, but if you sell assets worth over €10 million, there will be a clawback period of 12 years. After this period, CGT will no longer apply. The Capital Gains Tax relief for investors in innovative start-ups will be improved. The lifetime limit on gains eligible for relief will increase from €3 million to €10 million. For Research & Development (R&D), the tax credit’s first-year payment threshold will increase from €50,000 to €75,000. This will help smaller companies or those using the credit for the first time. Small Benefit Exemption: Employers can now give workers non-cash benefits or rewards worth up to €1,500 (increased from €1,000) without having to pay income tax, PRSI, or USC on it. Company Cars: The €10,000 universal relief for company cars will be extended for another year. Employees with an electric company car will get a total benefit-in-kind (BIK) relief of €45,000 in 2025. This includes €35,000 for electric vehicles and the extra €10,000 temporary relief. Additionally, there will be a BIK exemption for installing electric vehicle chargers at the homes of employees or directors. Other Supports: The Employment Investment Incentive, Start-Up Relief for Entrepreneurs, and Start-Up Capital Incentive will be extended until the end of 2026. The maximum amount an investor can claim under the Employment Investment Incentive will double from €500,000 to €1 million. The relief available under the Start-Up Relief for Entrepreneurs will increase from €700,000 to €980,000. VAT Registration: The VAT registration thresholds are being increased. For the sale of goods, the threshold will go up from €80,000 to €85,000, and for services, it will rise from €40,000 to €42,500. Stock Exchange: A new relief is being introduced to cover expenses for companies listing on an Irish or European stock exchange for the first time, with a limit of €1 million. Need help? We understand that getting a handle on budgetary changes can be daunting particularly when it comes to managing your payroll obligations. If you have questions or need help setting up or running your payroll processes, GroForth can provide practical support. Contact us for details of our payroll services. Sources: https://www.rte.ie/news/budget-2025/2024/1001/1472970-budget-2025-summary/ https://www.irishexaminer.com/business/economy/arid-41487173.html
Payroll Basics for Employers
September 5, 2024
In this blog, Michelle takes us through the main payroll criteria that employers should be aware of.
VAT and Other Taxes that Could Affect Your Business
July 9, 2024
In this article, GroForth’s Geraldine explains how to get to grips with the different taxes that could affect your business.
Why You Might Need a Virtual Accounts Department
July 9, 2024
In this article, GroForth’s Michelle Collins explains how introducing a Virtual Accounts Department can positively impact your business.
How will the new Retirement Savings Scheme affect payroll?
April 29, 2024
In this article, GroForth’s Michelle Collins explains how auto enrolment will affect Irish employers.
Common payroll headaches and how to resolve them
March 11, 2024
In this blog, we share five common payroll pain points that people complain about along with some tips for how to resolve them.
More Posts
Share by: