Why Businesses Need to Control Spend and Increase Cash Flow Now By Sarah Murphy As inflation continues to rise, businesses need to make financial decisions that will allow them to survive economic downturns and thrive in spite of fiscal uncertainty. At Mesh Payments, we’ve always helped customers optimize their corporate spend, and being able to control and limit corporate spending has never been more important than it is right now. In order to steady the ship during economic turbulence, it’s crucial for companies to review expenses and make tough decisions about what is necessary, what can be afforded, and what may have to be renegotiated or eliminated. Managing cash flow is essential to this. Let’s go over some of the ways Mesh is able to help your business save on unnecessary spending and control cash flow to not just survive an economic downturn, but continue to thrive during one. Contents hide How to Calculate Your Business’s Cash Flow Why Cash Flow Is Important — Especially in a Downturn Tips for Increasing Cash Flow How Mesh Helps Businesses Control Spend and Save Money FAQs How to Calculate Your Business’s Cash Flow At the most basic level, cash flow is the amount of money that is moving in and out of your business at any time. However, there are multiple ways to calculate your cash flow, depending on the type of analysis you are looking for. Here are four common formulas used to calculate cash flow. Cash Flow Statement A cash flow statement provides details of a company’s cash during a specific amount of time. It takes into account the operating activities, investing activities, and financing activities of the business. By combining the earnings or loss of these three categories and adding it to the beginning cash balance, you get the end cash balance. End Cash Balance = Operating Activities +/- Investing Activities +/- Financing Activities + Starting Cash Balance Operating Cash Flow Operating cash flow refers to a company’s total revenue minus operating expenses. It is also known as earnings before interest and taxes. Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital Free Cash Flow Free cash flow, meanwhile, refers to the amount of cash that is available to a business for use. This is money that is on-hand and can be used to reinvest into the business — whether that means purchasing new equipment, buying employees a holiday gift or paying down a business loan. It is calculated by subtracting capital expenditures from the operating cash flow. Free Cash Flow = Cash from Operations – Capital Expenditures Cash Flow Forecast A cash flow forecast is calculated to project how much cash your business will bring in within a particular time period (typically a month or a quarter). To come up with the figure, add the amount of cash you start with to the projected cash flow coming in (invoices received and payments made to your business), then subtract the projected outflow of cash (payments your business will make and expenses). Cash Flow Forecast = Starting Cash Balance + Projected Cash Inflow – Projected Cash Outflow Why Cash Flow Is Important — Especially in a Downturn Simply put, cash flow is a good indicator of the success of your business. If you have a positive cash flow, you have more money coming into your business than going out, which is generally a sign of success. Contrarily, a consistently negative cash flow is probably a sign that failure is imminent. In fact, 82% of failed businesses cite cash flow problems as a main reason for collapse. During a downturn, especially, it is crucial to maintain positive cash flow in order to help your business survive. Employees may need further assistance, utility prices may surge, and supply chain issues could cause major delays —without cash on-hand, your business will not be able to meet these challenges. In order to respond to unexpected circumstances, most businesses will likely need to increase their cash flow, at least temporarily. Read on for some suggestions for increasing cash flow. Tips for Increasing Cash Flow 1. Implement Incentives and/or Penalties Making sure that customers pay on time can ensure that you are consistently receiving the cash you are expecting and need to operate your business. Offer incentives to customers who make payments early or charge penalties for late payments (or both!) to encourage customers to make timely payments and keep your projections on course. 2. Lease Instead of Buy If you need new company equipment like machinery, tech equipment or vehicles, consider leasing or leasing-to-owning instead of outright buying. This allows you to get the necessary items immediately without losing a large chunk of cash. 3. Negotiate AP Terms Go over your accounts payable terms with clients and suppliers, and determine if there is room to negotiate. If the contract allows for it, you can pay invoices later in the month without penalty — allowing you to keep more cash on-hand until you have received payments from customers. 4. Track and Forecast Map out your weekly/monthly/quarterly spending and identify trends that are likely to repeat. You’ll also when during a month you typically have more cash coming or going, and you can plan your own payments and deadlines accordingly to ensure that you have an optimal amount of cash on-hand at all times. 5. Control Company Spending Make sure you know where all company spending is happening at all times. Only then will you be able to identify where you can cut wasteful spending and save on any unnecessary cash outflow. How Mesh Helps Businesses Control Spend and Save Money Full Visibility You can’t control your corporate spend without knowing exactly how much money is being spent and where — and Mesh gives you full visibility into your corporate spend. With unlimited virtual cards, you can limit who has access to funds, where that money can be spent, and how much can be spent. Cards can be locked to specific vendors, approval flows can be customized, and cards can be suspended with a few clicks. Receipts can be uploaded digitally on-the-go so no transaction ever goes unaccounted for, while purchases are instantly categorized to ensure the finance team knows where the money is coming from and where every penny is going. The Mesh dashboard gives you an overview of company finances, but you can also dig into each and every individual transaction to gain detailed insights on every aspect of your corporate spend. Armed with complete visibility, your company can easily determine where budgets need to be reallocated or cut — organizing your cash outflow and saving your business money. Optimize SaaS Spend Mesh Payments help you manage your recurring costs like SaaS subscriptions. It can help you identify where you are spending unnecessarily, and even suggest cheaper alternatives. By managing your SaaS subscriptions through Mesh, you can easily see how much your overall subscription spend is costing. Mesh will even notify you of unused and redundant tools or licenses you are paying for, and can offer you cheaper alternatives for software that performs similar functions. We will also alert you to any suspicious or duplicate charges that differ greatly from month-to-month. Furthermore, if you decide to cancel any of your subscriptions, you can do so in a few simple clicks and keep track of the cost savings right in the Mesh platform. Reduce Fraud Businesses lose 5% of their revenue to fraud every single year. That can add up to a lot of money very quickly. Corporate fraud can take on many different forms — from unauthorized travel to personal purchases with company funds to straight up embezzlement. Mesh Payments can help your company protect itself from all kinds of fraud. Virtual cards can be controlled by budget, user, date, and vendor, ensuring that corporate funds are only being spent where they have been approved. If exceptions are needed for any of these criteria, notifications can be sent to the appropriate manager right away for approval. And if suspicious activity is detected, cards can be suspended instantly with a simple click. Furthermore, digital receipt collection and expense tracking ensures that there is an immediate record of every transaction made with company money. Traditional corporate cards, meanwhile, often miss fraudulent charges until a statement is issued during month-end reconciliation. Mesh Payments takes security seriously, and is SOC2 certified. It’s Free (No, Really) In addition to helping you track and reduce corporate spending, Mesh also saves your company money by costing nothing. That’s right — nada, zip, zilch. Zero dollars. Unlike other platforms, Mesh doesn’t charge users for access to the platform. So, you can rest assured that Mesh will not be running up your monthly SaaS subscription bills. There are no hidden costs, no premium memberships, and no commitment. If you’re not happy with our spend management system, you can cancel at any time — and we still won’t charge you. Cash back! Not only is the Mesh platform free of fees, but you actually make money by using it. By using Mesh corporate cards to make purchases you would be making anyways, you will receive a minimum 1% cash back. That applies to all business expense categories — office supplies, SaaS subscriptions, travel expenses, and more. Whatever you use Mesh cards to purchase will earn you cash that goes right back into your account. Think of it as a reward for taking control of your corporate spend! To learn more about how Mesh Payments can help your business manage spend and save money during an economic downturn, schedule a demo today. FAQs What is cash flow, and how is it calculated? Cash flow is the movement of money in and out of a business. It can be calculated through four common formulas: cash flow statement, operating cash flow, free cash flow, and cash flow forecast. How is operating cash flow determined? Operating cash flow is calculated by subtracting operating expenses from total revenue (earnings before interest and taxes). What is free cash flow, and how is it calculated? Free cash flow represents available cash for the business. It is calculated by deducting capital expenditures from the operating cash flow. How is a cash flow forecast calculated? A cash flow forecast predicts a business’s cash inflow and outflow over a specific period. To calculate it, add the starting cash balance to projected inflow and subtract projected outflow. Why is cash flow crucial, especially during a downturn? Cash flow is vital for evaluating business success. Positive cash flow indicates more money coming in than going out, whereas negative cash flow can lead to failure. During a downturn, positive cash flow is essential for business survival amidst unforeseen challenges. What are some tips to increase cash flow? To boost cash flow, consider implementing incentives/penalties for timely payments, leasing instead of buying equipment, negotiating accounts payable terms, tracking and forecasting expenses, and controlling spending to reduce waste. How does Mesh assist businesses in controlling spending and saving money? Mesh offers full visibility with unlimited virtual cards, customized approval flows, and receipt tracking. It optimizes SaaS spend, identifies unnecessary subscriptions, and suggests cost-effective alternatives. Mesh also reduces fraud risk by controlling virtual cards based on various criteria and providing instant suspension for suspicious transactions. Get the latest blogs from Mesh by subscribing to our newsletter Manage Your Payments With Full Control & Visibility Get Started Sarah Murphy Sarah is a Content Manager for Mesh Payments. Before working in marketing, she completed her Master of Journalism degree at Toronto Metropolitan University (f.k.a. Ryerson University) and worked as an arts journalist in Toronto. She was a content writer for tech companies in the retail and workforce management sectors before joining Mesh in 2022.