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 businesses 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 paves the way for secure business expansion. 

For Matheus Beirãofounder of Daily BurningA platform with at-home exercise programs, the view on cash flow needs to go beyond simply recording daily inflows and outflows. According to him, this control acts as a radar to identify periods of low sales and anticipate high-sale periods, enabling more confident decision-making. 

"Many entrepreneurs only look at the cash flow when money is running low, but the secret is in constantly monitoring and planning from that data. That's how we grew, investing at the right time and more safely," 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 that 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, like rent and payroll, and prepare for extra costs. Knowing the company will have to pay the 13th-month salary at the end of the year allows for advance resource allocation.

Matheus Beirão emphasizes that understanding business cycles prevents hasty decisions. He says 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 can be temporary. I've considered cutting costs, but when I looked at the numbers, I realized it was better to hold off, as the momentum would improve in the following weeks," he explains.

Forecasting and capitalizing on seasonality

Another relevant aspect of cash flow is forecasting seasonality. Clothing stores, for example, typically experience higher traffic during collection changes, while stationery stores see a sales peak in January, around the back-to-school period.

Companies that monitor these variations can prepare their inventory and staff accordingly to meet 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 companies. "By realizing that certain months saw higher demand for our products, we increased advertising investments during those periods, and the results doubled. This cash flow analysis was essential," he reports.

Strategies for expanding without choking the cash flow

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

Another tip is to reinvest part of the profits gradually. A coffee shop looking to open a second location, for example, could start by increasing the capacity of the current store and assessing the financial impact before taking a bigger 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 wiggle room before taking each step. This way, we grew without suffocating operations," he concludes.