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

Lack of financial control is one of the main reasons for the closure of small businesses in Brazil. According to a Sebrae study, 48% of micro and small businesses close their doors 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 safe business expansion. 

For Matheus Beiraofounder of Daily BurningA platform with home exercise programs, a view on cash flow needs to go beyond just recording daily income and expenses. According to him, this control acts as a radar to identify periods of low sales and anticipate high-sales moments, enabling more secure decisions. 

"Many entrepreneurs only look at the cash register when money is running low, but the secret is to constantly monitor and plan from that data. That's how we managed to grow, 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 that sales decrease at the beginning of the month and, consequently, 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 advance resource allocation.

Matheus Beirão emphasizes that understanding business cycles prevents hasty decisions. He says relying solely on intuition, without concrete data, causes 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 looking at the numbers, I realized it was better to hold off, as the situation 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 turnover during collection changes, while stationery stores see a peak in sales in January, with the return to school.

Companies that monitor these fluctuations can prepare their inventories and teams accordingly to meet demand. The same applies to service providers, such as beauty salons, who need better organization around holidays.

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

Strategies to expand without suffocating the cash flow

Planning expansions using a cash flow also reduces risks. Small renovations or equipment acquisitions can jeopardize finances if not scheduled. Ideally, expenses should be broken down into installments that fit within the projected revenue.

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

For Matheus Beirão, it was this careful approach that ensured Queima Diária's stable growth. "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.