48%: Small businesses close due to lack of cash flow control

Lack of financial control is one of the main causes of small business closures in Brazil. According to a Sebrae study, 48% of micro and small enterprises close due to problems related to a lack of financial planning and cash flow mismanagement. Despite this, many entrepreneurs still underestimate the importance of cash flow, a tool that prevents crises and opens the path to safe business expansion. 

For Matheus Beiraofounder of Daily BurnA platform with home exercise programs, the view on cash flow needs to go beyond recording daily inflows and outflows. According to him, this control serves as a radar to identify periods of low sales and anticipate high periods, enabling safer decisions. 

"Many entrepreneurs only look at the cash flow when money is running low, but the secret is to constantly monitor and plan from that data. That's how we grew, by investing at the right time and with more security," he says.

Why Cash Flow is Crucial

Monitoring daily entries and exits allows the entrepreneur to perceive changes in customer behavior and adjust their strategies. For example, a restaurant might notice sales decline at the beginning of the month and, therefore, plan specific promotions for that period.

This control also helps manage fixed and predictable expenses, such as rent and payroll, and prepare for extra costs. Knowing that the company will have to pay the 13th salary at the end of the year allows for resources to be set aside in advance.

Matheus Beirão emphasizes that understanding business cycles prevents hasty decisions. According to him, relying solely on intuition, without concrete data, leads many entrepreneurs to take on debt or reduce staff during temporary downturns. "Cash flow shows that a bad period might just be temporary. I've considered cutting costs, but by looking at the numbers, I realized it was better to hold off, as the momentum would improve in the following weeks," he explains.

Forecasting and leveraging seasonality

Another relevant aspect of cash flow is forecasting seasonality. Clothing stores, for example, typically experience higher transaction volume during collection changes, while stationery stores see a peak in sales in January, due to the return to school.

Companies that monitor these fluctuations can prepare their stock and teams according to demand. The same applies to service providers, such as beauty salons, who need to better structure themselves around holidays.

Beirão comments that understanding these fluctuations allowed him to optimize investments in his businesses. "By realizing that certain months saw increased demand for our products, we began investing more in advertising during those periods, and the results doubled. This analysis of cash flow was essential," he reports.

Strategies for expansion without choking the cash flow

Planning expansions using cash flow also reduces risks. Minor renovations or equipment purchases can jeopardize finances if not scheduled. Ideally, expenses should be spread out so that installments fit within the projected revenue.

Another tip is to reinvest a portion of profits gradually. A coffee shop hoping to open a second location, for example, could start by expanding the capacity of their current store and assessing the financial impact before taking a larger step.

For Matheus Beirão, this careful approach ensured that Queima Diária grew steadily. "The desire to expand is strong, but if the cash flow doesn't support the growth, the dream turns into a nightmare. I always analyzed if there was financial breathing room before taking each step. This way, we grew without suffocating operations," he concludes.