Minimum Cash Flow: The 7-Figure Growth Secret That Could Tank Your Business If You’re Missing It

Minimum Cash Flow: The 7-Figure Growth Secret That Could Tank Your Business If You’re Missing It

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Are you concerned you don’t know the minimum cash flow balance you need to set for your growing business?

Understanding and setting aside your minimum cash flow closing balance is the secret to sustaining prolonged business growth and ensuring your business’s financial health.

Just Imagine. Your multiple six—or seven-figure business is growing fast, but an unexpected expense like a massive tax bill or website upgrade puts your cash flow into the red. Other vendors’ bills are stacking, and you are starting to receive reminders. You are not even sure whether you can make the payroll at month-end.

Does this resonate with you?

This is the role of setting a minimum cash flow balance.

In this guide, I will show you how to set your minimum cash flow balance to ensure you have a financial safety net without getting into the nitty-gritty of budgeting and cash flow forecasting so that you have financial peace of mind.

Here’s the problem I see too often.

Many small business owners like you focus on revenue growth, believing sales revenue will solve all the problems. From my experience of working with hundreds of small business owners and entrepreneurs over the last twenty years as a chartered certified accountant turned cash flow specialist, it creates more cash flow problems than it solves.

It reminds me of a seven-figure dental practice owner who owns three practices around the Kingston upon Thames area. His quest for wanting to grow quickly led to running out of money and having to sell the dental practices at three times EBIT only, where he could have achieved six times at least, resulting in a difference in business valuation of £1.2m

From what I recall from another dental practice owner based in Portsmouth, consistently doing £750k patient income, he couldn’t cross the seven-figure mark because he feared running out of money before the month ran out.

From what I shared above, can you afford to neglect your minimum cash flow?

If you are still here, it means you are an:

Ambitious growth-minded small business owner looking to take your business to the next level by utilizing the power of setting aside minimum cash flow.

If yes, then you are in the right place.

Why does maintaining a minimum cash flow balance matter?

Here’s what I believe.

“Understanding minimum cash flow is the foundation of effective cash management. You can’t manage your business if you can’t manage cash flow”

In addition to cash management, here are other crucial reasons you need to know.

Releasing Excess Cash (Free Cash Flow) Safely To Invest In Business Growth

When you know the minimum cash flow you need to run your business operations, you can use extra cash to reinvest in your business growth aggressively. This is called free cash flow.

I do this for my clients by setting aside cash needed to support working capital for the next twelve weeks and any upcoming tax payments, such as VAT, Corporation tax, or self-assessment. I also cover capital expenditures and then invest the remaining cash.

For me, extra cash is like an accelerator pedal in a vehicle. When you press it, your business as a car goes faster, and you know it has enough cash to keep your business running smoothly.

It reminds me of a SAAS company that wanted to re-invest their series B funding into product development.
When they approached me to evaluate the cash flow position in hindsight, investing all funding of £250k on product development made sense when looking at projected monthly recurring revenue.

However, looking deeper into the current state of cash inflows and cash outflows suggested to me that they needed to set aside £78,525 for the next twelve weeks to cover salaries, rent, VAT quarterly payment, subscriptions, and some freelancer costs as team members.

As a result, the company decided to invest £ 171,475 (£250,000- £78,525). Seven months later, the company released version two of the software, which increased the number of subscriptions and thus increased monthly recurring revenue( MRR) by 32%, contributing to the company’s bottom line of £109k profit.

Negotiate On Yours Terms

From my work with clients over the years, I have seen that knowing your minimum cash flow allows you to confidently negotiate better terms on loans, lines of credit, or other forms of debt, potentially securing lower interest rates and easing repayment pressure.

Like one of my luxury goods retailer clients, a London-based bed retailer, the company’s consistent positive cash flow allowed me to advise the client to negotiate early payment discounts of 2.5% with one of the main suppliers.

A 2.5% discount on invoices paid within seven days instead of 30 days may sound small. However, over a year, the cash savings amounted to £48,325.89, which went directly to the bottom line profit.

Data-Driven Decision-Making

Here’s what I believe.

“Financial Data Drives Decisions”

Just like as a human, we would seek to meet our daily needs like food, water, and shelter; then only we seek luxury; when you have real-time accurate data to make cash flow decisions, you are covering your basic needs like ensuring financial stability, and then you look for scaling the business.

Furthermore, understanding your minimum cash flow also provides a foundation for creating cash flow predictions, so you have a very good idea of what your future cash flow will look like today. This allows you to make proactive changes.

It reminds me of a dental practice owner who earns £45k monthly in patient income. He struggled to understand how much he could safely allocate to patient acquisition.

Furthermore he didn’t have an idea which marketing channel and, in particular, which marketing campaign were getting them more profitable patients to grow his dental practice faster in a profitable way.

Attracting Investors

From what I have seen working with clients over the years, investors not only seek for your business growth potential, they also want to see how well you manage growth.


Because there’s a financial risk involved.

When you understand the minimum cash balance you need over a specific period to cover your financial obligations, you can better communicate your value proposition to attract investors.

What do I mean by that?

I worked with a retail business owner with an annual revenue of £1.8m a few years ago. When I reviewed the financial statements, I noticed the trend of net cash flow increasing by 10 to 12% by quarter compared to the previous year’s same period.

I advised the client to seek additional investments at this time.

Any investor would want to invest in a cash-rich, profitable business.
My client had the additional cash injection to grow faster and give lesser equity.

The Psychology of Cash Flow

If you have been living with the constant fear of running out of money before the month ends, then you need to know your minimum cash flow.

Here’s why.

Without knowing your financial safety net, you constantly think about what would happen if you didn’t have enough money to cover the expenses. This occupies your mind space, limiting your ability to make strategic financial decisions.
From my experience of working with clients as their accountant over the last two decades, I have seen that they always wanted to have an extra zero in the bank account to cover all known and unknown financial obligations.

Let’s say you are a dental practice owner earning £ 650k annually from patients and currently have £39k in your bank account. You might be concerned that you don’t have enough cash to pay self-assessment tax on 31 July and 31 January and still have enough cash to pay nurses, dental associates, material, and lab bills on time.

Let’s assume you have a chain of dental practices with an annual patient income of £6.5m and currently have £390k in the bank account.

The same concerns apply.

What if there is not enough to pay salaries, associates, self-assessment, and corporation tax on time?
It shows the mental barrier that business owners face when deciding how much they need to survive and how much they need to utilise the excess cash to thrive.

Now we have covered in depth “why” minimum cash flow matters to you, next step is to learn how to do minimum cash flow calculation.

Let me show you my proprietary process for establishing the minimum cash flow balance in any sector, size, and stage of the business next. These are the steps I follow when establishing a financial safety net for my clients, reaching up to £53.8m annually.


Let’s go.

Before we do that, we need to cover the factors that lead to deciding how much minimum cash flow balance and when.

Factors That Affect Your Minimum Cash Flow Requirement

If you want to know, how much safety net you need to survive and thrive, then you need to know these factors that affect it.

Here’s the thing.

There is no one size fits all.

Sector You are In

Every business sector has its own cycle of customer payments and payments made to vendors and other creditors.

Going even deeper, even the business model affects your minimum cash flow requirement.

For example, I work with two retailers.

Made to Order

The first one sells made-to-order goods, which means the company collects cash upfront from customers and uses that cash to pay vendors. So, this business needs to understand that cash received in the bank account is not completely theirs. As a result, the minimum cash balance required is much higher because the business hasn’t paid the cost of goods yet in addition to paying overhead expenses.

One of the mistakes I often see is that business owners think he is more prosperous than he is. Don’t fall into this trap.

Buy To Sell

The second client is also in the retail sector, but this business buys and sells the inventory. So, after already paying for inventories at the end of the month, the minimum cash balance required is much less as the business only has to cover overhead expenses.

Size Of the Business

Here’s my view on the size of the business. The bigger the size, the bigger the safety net you need.

One of my clients in the dental sector used to have £35k operating expenses to pay a year ago. Now, having added a few more dental nurses, a treatment coordinator, and a dental associate, operating expenses have increased to £47.5k. Furthermore, you also need to invest in capital expenditure, like refurbishing your patient waiting area. It all adds up. Thus, they need a bigger safety net.

Seasonality Issues

Every business I have worked with experiences dry seasons. June, July, and December are quieter months. So, when considering the minimum cash flow balance, your requirement will drop slightly as you will mainly spend on fixed overhead expenses.

Scaling Goals

From what I have seen, if you are looking for steady growth, there is less financial risk and, therefore, less of a minimum cash flow requirement. However, if you are seeking rapid growth, having a bigger safety net is better.

Situation Awareness

Every business has its financial year end in the UK, depending on when you incorporated your company in the company’s house. Also, the VAT quarter ends.

Why are these important from a minimum cash flow requirement point of view?

You pay corporation tax nine months and one day after the year ends and need cash. Similarly, if you file quarterly standard VAT, as most businesses opt for, you will pay VAT in May/Aug/Nov/Feb.

So, when you are preparing your next twelve-week minimum cash flow needs, you need to take these cycles into account. So consider those carefully when calculating your minimum needs throughout your accounting period.

How To Calculate Your Minimum Cash Flow Balance?

I understand that learning financial skills while wearing many other hats can be overwhelming for small business owners or entrepreneurs.

However, I am going to simplify it for you step by step. To do this, you will need all three forms of financial statements—income statement, balance sheet, and cash flow statement. I will explain where and when they are necessary in the steps.


STEP 1- Ensure Accurate Cash Flow Data

To determine your true minimum cash flow, we need reliable information. Ensure you have accurate cash inflow and outflow data for the past twelve months. Cash inflow refers to receipts, where as cash outflow refers to payments.

To do this, under the balance sheet, in the current asset section, you can select the relevant bank account(s) and populate the cash flow data, as shown below.


cash flow data populated from Quickbooks online software


Step 2 – Analyze Your Non-Negotiable Costs: Identifying Fixed Expenses

There are two ways to do this:
You can go through overhead expenses in your income statement.

You can also sort the cash outflow information gathered in step 1 by cash outflow amount. You will see the pattern of the identical monthly amounts for usual suspects like rent, salaries (wage), PAYE/NI, and Subscriptions.

Most people I have encountered use the first method. I personally prefer the second method because I would like to keep it simple by utilising the information we already have in step 1.

Step 3 Mitigate Risk: Analyzing Variable Cost Trends

To do this, just like in step 2, you have two options.

Option 1: You can go through the costs of sales in the income statement.

Option 2: You can again sort the cash flow data you have available, this time by account type (what you paid for) instead of amounts.

Again, I personally prefer option 2

Step 4-Tailor Your Financial Safeguard: Determining Your Buffer

Now that you understand fixed expenses and variable costs from steps 2 and 3, the next step is to establish your buffer.

As there is no one-size-fits-all, you must also consider the factors I laid out earlier in this guide.
For example, are you heading into the dry season, or is your corporation tax, self-assessment, or VAT amount due?

For example, one of my clients in the retail sector selling bikes, which is £2.5m in annual revenue, is based in Wandsworth, London, and has December year-end and operates standard VAT quarters March/June/Sept/Dec. This means that he has to pay corporation tax liability (which is a part of the current liability you can find in the balance sheet) at the end of September every year and quarterly VAT payments for the quarter ending September by the 7th of November. As two big payments are going out in the space of two months, this particular quarter becomes very challenging for him. So, I advised him to adjust this quarter’s minimum cash flow requirement accordingly.

So, there are two methods you can use to handle this.

Method 1: Keep the fixed expenses from step 2 as they are and add 5%/10% for anticipated sales growth. It’s simple to calculate. However, picking the right percentage is super important.

Method 2: Focus on maintaining enough cash to cover 13 weeks of operating expenses. This approach is clear and black and white, which I like. However, you do need a good grasp of your cash movements.

Step 5- Your Evolving Safeguard: Monitoring & Refinement

Monitoring your minimum cash flow requirement is as important as calculating it.


Your business is an evolving entity. As time passes, so do your financial needs. This is why regularly monitoring cash flow is crucial.

By doing this, you will be able to achieve the following:

  • Stay on track to reaching your minimum cash balance target.
  • Adjust your cash flow needs depending on your specific cash flow cycle
  • You will create a routine of reviewing cash flow.
  • Do effective cash flow planning to support your business growth ambitions.

You might wonder how often you should review your company’s cash position.

Here’s what I believe.

Routine Drives Results- Shishir Khadka

If you set a routine to review monthly or at least quarterly, these are good cash flow best practices. .

There is no hard and fast rule on choosing the frequency. Choose the routine based on how rapidly the variable costs change month to month.

If you want in-depth guidance on cash flow monitoring strategies and action plans, check out my dedicated guide- How to monitor cash flow like a CEO

The detailed walkthrough video below has an example so you can look over my shoulder and establish your minimum cash flow needs as you follow along.

Ready to Set Your Minimum Cash Flow Balance?

Now that you understand the importance of minimum cash flow balance, it’s time to take action!

You have two options.

Option 1: You can download my free customised Microsoft excel spreadsheet template and follow my step-by-step video walkthrough to establish your minimum cash flow.

Option 2: You can book a call with me and my team to accelerate establishing your minimum cash balance quickly and accurately without overwhelm and guesswork.

Here’s the link to book a call.

Either way, see you on the other side.

“I would like to thank Shishir and his team for helping me to systemise the process of working out the minimum cash flow balance to ensure operating cash flow intact. This has enabled me to grow my business with effective cash flow management practices knowing I am covered to pay for bills. Finally, I feel like I’m in complete control”
Dr Samit Chitre
7 figures dental practice owner, Postmouth, UK
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Shishir Khadka, qualified as a chartered certified accountant in 2009. He is the creator of cashflow hub– the world’s most comprehensive cash flow resource online and is one of the UK’s leading cash flow specialist who helps busy business owners and entrepreneurs generate more profit and create consistent positive cash flow without over relying on getting new sales.

He has delivered a masterclass to a global software Zoho’s audience to create consistent cash flow. He has written articles for floatapp– one of the leading cash flow software and has also been featured in the major publications such as Independent. He has been sharing his learning and insights on his youtube channel.

He wrote about his learnings from helping an e-commerce client scaled the business cash flow positive from £500k to £1.6m in four years in “The Three Key Obstacles to Faster Growth: How You Can Overcome Them Using Cloud Accounting.

In his career spanning 18 years as the cash flow specialist, he has helped businesses of all sizes, ranging from £40K to £40M.

Minimum Cash Flow: The 7-Figure Growth Secret That Could Tank Your Business If You’re Missing It

By Shishir Khadka, FCCA.