Short answer: Cash flow is the money moving into and out of your business. A business can be profitable on paper and still run out of cash if customers pay late, stock ties up money, or big bills land at once. Track cash weekly, forecast the next 13 weeks, get paid faster with deposits and reminders, and time your own payments carefully.
Profit is not cash
Imagine you supply ₦2 million of goods in March at a ₦400,000 profit, but the customer pays in June. In March and April you still pay rent, salaries and suppliers. Your profit and loss looks great; your bank account doesn't. This gap is the most common reason small businesses struggle, especially when selling to companies and government on credit.
| Profit | Cash | |
|---|---|---|
| Counts | Sales and costs when they happen | Money when it actually moves |
| Answers | "Am I making money?" | "Can I pay what's due this week?" |
| Affected by late payments | No | Yes |
| Affected by buying stock | Only when sold | Yes, immediately |
The three things that drain cash
- Receivables: money customers owe you. The longer they take, the more cash you need.
- Stock: goods on your shelves are cash you can't spend.
- Big lumpy costs: annual rent, generator repairs, equipment, school fees for your own children, festive stock.
A 13-week cash forecast in 20 minutes
Make a simple table with one column per week for the next 13 weeks:
| Week 1 | Week 2 | Week 3 | ... | |
|---|---|---|---|---|
| Opening cash | ||||
| + Expected customer payments | ||||
| + Other money in | ||||
| − Suppliers | ||||
| − Rent, salaries, fuel | ||||
| − Loan repayments, taxes | ||||
| Closing cash |
Fill in what you know: invoices and their due dates, bills and their due dates, regular costs. The weeks where closing cash goes low or negative are your warning: act now, not when the account is empty. Update it every Monday.
Speed up money coming in
- Ask for deposits on custom orders and projects.
- Invoice the same day, with short terms (due on receipt or 7 days).
- Send automatic reminders before and after due dates (how to get paid on time).
- Make paying easy: bank details on every invoice, payment links where possible.
- Follow up the oldest unpaid invoices first, by phone.
Slow down money going out (without hurting relationships)
- Negotiate supplier terms: 14 or 30 days instead of cash on delivery, once you've built trust.
- Buy stock in smaller, more frequent batches where prices allow.
- Spread big costs: monthly or quarterly rent if your landlord accepts it.
- Pay bills on the due date, not early (unless there's a discount for paying early).
- Review subscriptions and recurring costs every quarter.
Build a buffer
Aim to keep at least one to three months of fixed costs (rent, salaries, data, fuel) in a separate account. Add to it in good months. It's what lets you survive a slow season, a late-paying big customer or a sudden repair.
Watch it weekly
Every Monday: cash across all accounts, who owes you (and how late), what you owe this week. In ENB, the money overview shows your cash across bank, cash, POS and wallets, who owes you, what you owe and what's due, and the weekly money summary email lists the week's bills and overdue invoices. The cash flow report shows money in and out by month. See bookkeeping.
Example: a caterer's December
Ada runs a catering business in Ibadan. December is her busiest month: ₦6 million in bookings. On paper it's a great month. But most corporate clients pay 30 days after the event, and her suppliers want cash at the market.
| Early December | Late December | January | |
|---|---|---|---|
| Money in | ₦1.2m (deposits) | ₦1.5m (individual clients) | ₦3.3m (corporate clients) |
| Money out | ₦2.0m (foodstuff, gas, staff) | ₦1.8m (foodstuff, staff, transport) | ₦0.6m (rent, salaries) |
| Net | −₦0.8m | −₦0.3m | +₦2.7m |
Without a forecast, Ada would run out of cash in mid-December during her best month. With it, she asks corporate clients for 50% deposits instead of 20%, negotiates 14-day terms with two suppliers she's used for years, and keeps ₦1 million in reserve from November. December goes smoothly, and January's payments rebuild the buffer.
The lesson: busy seasons need more cash, not less. Forecast them early.
Key takeaways
- Profit and cash are different: watch both every week.
- Forecast 13 weeks ahead and update the forecast every Monday.
- Deposits, short terms and steady reminders bring money in faster.
- Negotiate supplier terms and spread big costs to slow money going out.
- Busy seasons need more cash, not less: plan for them early.
- Keep one to three months of fixed costs as a buffer in a separate account.
Frequently asked questions
What is cash flow in simple terms?
The money coming into and going out of your business over a period. Positive cash flow means more came in than went out.
Why does my business make profit but have no money?
Usually because customers haven't paid yet, money is tied up in stock, or large costs fell due at once. Profit counts sales when made; cash counts money when received.
How much cash should a small business keep?
A common target is one to three months of fixed costs in reserve.
How do I improve cash flow quickly?
Chase overdue invoices by phone, ask for deposits on new orders, and negotiate supplier terms.
What is a cash flow forecast?
A week-by-week estimate of the money you expect in and out over the coming months, so you can see a shortfall coming and act early, for example by chasing invoices or delaying a purchase.
We build the ENB business platform and support Nigerian businesses from our offices in Yaba, Lagos and Owerri. This guide is general information, not legal, tax or accounting advice; for your own situation, speak to a qualified professional.