Introduction
Many businesses in Kampala and across Uganda can show sales—but still struggle to pay suppliers on time, manage payroll confidently, or invest in growth. This happens because sales do not automatically translate into cash. Profit and cashflow are not the same thing, and the difference is where many SMEs experience stress.
Cashflow challenges usually show up in predictable ways:
- Customers delay payments
- Expenses happen before income arrives
- Stock is purchased faster than cash is collected
- Owners withdraw from the business without planning
- The business grows, but controls do not grow with it
The purpose of advisory is to bring clarity: understand your cash movement, plan ahead, and create controls that keep the business stable.
This article provides a practical cashflow and budgeting framework that SMEs can use immediately.
1) Understand the Difference: Profit vs Cashflow
Profit is the difference between income and expenses on paper.
Cashflow is the movement of real money in and out of your accounts.
You can be profitable and still cash-poor if:
- Customers owe you money
- Your money is tied in stock
- You are paying suppliers quickly but collecting slowly
A cashflow mindset is essential for stable operations.
2) The Three Cashflow Questions Every Owner Should Answer
At least once a month, management should answer:
- How much cash do we have now?
- What cash must go out in the next 30 days?
- What cash is expected to come in, and how sure is it?
If you cannot answer these, the business is operating on hope.
3) Build a Simple Cashflow Forecast (30–60 Days)
You do not need complex spreadsheets. A basic forecast has:
Cash In (expected)
- Customer payments expected (with dates)
- Cash sales estimates (if consistent)
- Other income expected
Cash Out (planned)
- Rent
- Salaries
- Supplier payments
- Loan repayments
- Utilities
- Tax-related payments (where applicable)
- Operational costs (transport, marketing, etc.)
Rule: Be conservative on cash-in and realistic on cash-out. Underestimating costs is a common reason for cash gaps.
4) Control Receivables (Debtors) to Improve Cashflow
Slow payments are a major cause of cashflow pressure.
Practical controls:
- Use clear invoicing and due dates
- Send reminders before due dates
- Set simple credit rules (who qualifies and how much)
- Follow up consistently and respectfully
- Offer payment options where appropriate
Also, track debtors weekly. If you wait until month end, the money is already late.
5) Control Payables (Creditors) Without Damaging Relationships
You need good supplier relationships, but you also need cash stability.
Practical actions:
- Negotiate payment terms
- Plan payments in batches (where possible)
- Prioritize essential suppliers first
- Avoid unplanned commitments
- Approve purchases only when cash availability is confirmed
Good businesses do not pay randomly—they pay according to a plan.
6) Introduce Budgeting That Is Practical, Not Stressful
Many SMEs avoid budgets because they think budgets are for large companies. In reality, a budget is simply a plan.
Start with a simple monthly budget:
- Target sales
- Expected direct costs
- Key operating expenses
- Planned investments (if any)
Then compare budget vs actual monthly:
- What went above plan and why?
- What was below plan and why?
- What needs adjustment next month?
Budgeting is not about perfection. It is about visibility and control.
7) Cashflow Leaks SMEs Should Close
Leak 1: Untracked small expenses
Small daily costs accumulate.
Fix:
- Use petty cash vouchers
- Summarize weekly
- Set limits and approvals
Leak 2: Stock purchased without cash planning
Buying inventory too early ties up cash.
Fix:
- Link purchasing to sales trends
- Maintain reorder levels
- Avoid panic restocking
Leak 3: Owner withdrawals without planning
Withdrawals that are not planned destabilize cashflow.
Fix:
- Set a fixed owner draw schedule
- Treat withdrawals as planned expenses
Leak 4: No financial “buffer”
Businesses run into trouble when they have no reserve.
Fix:
- Build a small buffer gradually
- Treat it as part of the plan
8) Advisory Controls That Improve Stability
Advisory is not just advice—it is structure.
Introduce:
- Monthly reporting (income vs expense, cash position)
- Weekly cash check (what is in vs what must go out)
- Approval thresholds for purchases
- Debtors follow-up schedule
- Supplier payment plan
- Simple KPI tracking (sales, margin, costs)
These controls make growth safer.
9) A Simple Framework You Can Implement This Week
Here is a 7-day implementation plan:
Day 1: List all cash accounts (bank, mobile money, cash) and confirm current balances.
Day 2: List all expected inflows for the next 30 days with dates.
Day 3: List all mandatory outflows for the next 30 days with dates.
Day 4: Identify the gap (shortfall or surplus) and choose actions.
Day 5: Create debtors follow-up list and assign responsibility.
Day 6: Create purchase approval rules and spending limits.
Day 7: Set a monthly reporting date and prepare a simple template.
This is enough to shift from reactive to proactive.
Conclusion
Cashflow and budgeting are not about complex finance theory. They are about consistently knowing what is coming in, what must go out, and what decisions keep the business stable.
If you want EDDO Consults to support you with cashflow planning, budgeting setup, monthly reporting, or internal control improvements, reach us:
Call: +256-701853163 / +256-777805628
Email: eddoconsults@gmail.com
Address: Room 5, Uganda House, 5th floor, Kampala, Uganda