Running a business isn’t just about selling your product or service — it’s about managing the money that keeps everything going. This flow of money is called the business finance cycle, and understanding it helps you avoid cash shortages, grow sustainably, and stay compliant.
Here’s a step-by-step look at how money moves through your business:
1. You Spend Money to Make Money
Before you can sell anything, you usually need to spend money on things like:
- Buying stock or raw materials
- Paying staff or contractors
- Rent, equipment, transport, etc.
This is called your operating or startup costs.
2. You Create or Deliver a Product/Service
Once you’ve spent the money, you either:
- Manufacture a product
- Purchase stock for resale
- Deliver a service
At this stage, your business is ready to earn income.
3. You Sell and Earn Revenue
Now your product or service goes to market. If you’re successful, customers buy from you and money starts coming in — this is called revenue.
💡 Important: You may sell on credit (they pay later), which means you need to track who owes you and follow up.
4. You Collect the Cash
This is where many businesses get stuck. Making the sale doesn’t mean you have cash in your account — especially if you offer 30-day payment terms.
Efficient debt collection and managing accounts receivable is key to having actual money to operate.
5. You Manage Your Cash Flow
With money coming in and going out all the time, your job is to make sure there’s enough in the bank to cover daily expenses, pay SARS, and reinvest into the business.
You’ll need to:
- Track cash flow weekly/monthly
- Plan ahead for slow seasons or big expenses
- Avoid spending everything you earn
6. You Reinvest and Grow
Once your cash flow is healthy, you can:
- Buy more stock or tools
- Hire help
- Expand your offerings or locations
This brings the cycle back to Step 1 — now with bigger goals.
💡 Final Tip:
Even profitable businesses can fail if they run out of cash. Profit is what you see on paper. Cash flow is what keeps your business alive.
Need Help Managing Your Finance Cycle?
At Prosperity Accounting and Bookkeeping Solutions, we help entrepreneurs like you stay on top of cash flow, taxes, and financial planning — even if numbers aren’t your thing.
👉 Book a FREE 15-minute call and let’s make your business finances work for you, not against you.
