5 Tools To Manage Operating Cash Flow For Your Agency

Running a successful agency requires more than just talent and creativity; it demands a strong grip on your finances. Among all financial aspects, managing operating cash flow during a specific accounting period is an important figure to assess the financial stability of your agency’s operations. Cash flow represents the movement of money in and out of your agency, and it’s vital for ensuring that you, as a business owner, are in tune with your company’s ability to generate cash flow and remain solvent while growing its operations. Track this metric over time so you can see when your business’s ability to become more or less profitable is changing and then dig into why.

But how do you stay on top of your cash flow in today’s fast-paced business environment? The answer lies in leveraging the right tools. In this article, we’ll explore five must-have tools to help you effectively manage your agency’s operating cash flow.

Quick Overview: 5 Tools to Manage Your Agency’s Operating Cash Flow

Managing operating cash flow is important for the financial health and growth of your agency. Here are 5 key tools that is available to manage operating cash flow:

Grof App – Manages multi-currency payments and tracks expenses, simplifying international transactions.
QuickBooks – Automates invoicing, payment collection, and tracking, ensuring timely payments.
Xero – Offers bank feed integration for seamless monthly reconciliation and AI-powered transaction matching.
Zoho – A versatile platform that provides invoicing, accounting, and expense tracking all in one.
Google Docs – A free, collaborative tool for tracking and managing cash flow using customisable templates.

What Is Operating Cash Flow (OCF)?

Operating Cash Flow (OCF) is a key financial metric that measures the amount of cash generated by an agency’s regular business operations. In financial accounting, OCF is also referred to as cash flow provided by operations, cash flow from operating activities, or free cash flow from operations. Unlike net income, which includes non-cash expenses like depreciation, OCF focuses solely on the cash inflows and outflows directly related to the agency’s core activities, such as providing services, managing client accounts, and paying operational expenses.

In essence, OCF reflects the cash that an agency has available to cover its day-to-day expenses, invest in growth opportunities, and maintain financial stability. A positive OCF indicates that the agency is generating enough cash from its operations to sustain itself, while a negative OCF could signal financial difficulties, requiring the agency to seek external financing or reduce expenditures.

Understanding OCF is crucial for agency owners and managers because it provides insight into the agency’s ability to generate sufficient cash to meet its obligations. By closely monitoring OCF, agencies can ensure they have the liquidity needed to pay employees, settle vendor invoices, invest in new projects, and ultimately grow the business. Tools like Xero, QuickBooks, and Grof can help agencies track and analyse their OCF, providing real-time data that supports informed financial decision-making.

5 Must-Have Tools to Manage Operating Cash Flow

To effectively manage operating cash flow, agencies must utilise the right tools. Here are five must-have tools that can assist agencies in managing their cash flow efficiently:

1. Grof App: Multi-Currency Payment Solution and Expense Tracking

Grof App can be an important tool for agencies dealing with international clients and managing expenses in different currencies. It offers several key features that simplify the process of managing international transactions:

Multi-currency payment processing: Seamlessly handle transactions in various currencies, allowing agencies to manage payments from clients across the globe. This feature simplifies international payments and reduces the complexity of handling different currencies.

Expense tracking: Monitor and categorise business expenses across different currencies. Grof App provides an intuitive interface to track expenses, offering a clear view of spending habits and helping agencies identify areas to cut costs or optimise spending.

Automation features: By automating expense management with features like auto-categorization, receipt capture, and smart reporting, agencies can gain clearer insights into spending patterns, reduce manual errors, and maintain better control over operating cash flow, ensuring funds are allocated efficiently and available when needed.

2. QuickBooks: Invoicing and Payment Collection

QuickBooks is an accounting software that excels in invoicing and payment collection. It provides agencies with all the tools they need to manage their finances efficiently and ensure they get paid on time:

Automated invoicing: Set up recurring invoices for regular clients, saving time and ensuring consistent billing.

Online payment options: Allow clients to pay invoices through credit cards, bank transfers, or other online methods, making payment collection easier and faster.

Payment tracking: Track invoice statuses and receive notifications when payments are made, helping to ensure timely follow-ups for outstanding payments.

3. Xero: Monthly Reconciliation

Xero is another recommended brand that can help agencies maintain accurate financial records and ensure that all transactions are properly accounted for. It offers several features to simplify reconciliation and provide valuable financial insights:

Bank feed integration: Automatically import transactions from your bank accounts for seamless reconciliation, reducing manual data entry and minimising errors.

Smart reconciliation: Use AI-powered suggestions to quickly and accurately match transactions.

Customisable reports: Generate detailed financial reports to gain insights into cash flow, helping agencies make informed decisions to improve their financial health.

4. Zoho: Comprehensive Business Management

Zoho offers a suite of business applications that help manage various aspects of cash flow and overall financial management. Its integrated solutions make it a versatile tool for agencies looking to streamline operations:

Zoho Invoice: Create and send professional invoices, track expenses, and accept online payments with ease.

Zoho Books: Manage accounting, invoicing, and banking in one place, offering a complete solution for financial management.

Zoho Travel and Expense: Provide the convenience of a simplified travel booking, faster expense reporting, and effective cost control.

5. Google Docs: Collaborative Financial Planning

For agencies looking for a simple, budget-friendly solution, Google Docs offers free templates for tracking and managing cash flow. While not as feature-rich as dedicated software, it can be a quick way to get started with financial management:

Cash flow templates: Easily find and download pre-built templates that allow you to track transactions, forecast cash flow, and manage expenses in a collaborative environment.

Real-time collaboration: Teams can collaborate on financial documents in real time, making it easier to share updates and work together on cash flow management.

Accessibility: Google Docs is accessible from any device with an internet connection, making it easy to manage financial planning on the go.

Choosing the Right Cash Flow Management Tool for Your Agency

When selecting the cash flow management tool that best suits your agency’s needs, consider the following key factors:

Integration Capabilities: Ensure the tool seamlessly integrates with your existing accounting software, invoicing platforms, and other financial systems to minimise data fragmentation and streamline the data-gathering process.

Automation and Efficiency: Look for an app or a tool that automates as many manual processes as possible, from reporting to data extraction, freeing up your team to focus on strategic decision-making.

Ease of Use: The platform should be intuitive and user-friendly, with a clear, well-designed interface that makes it accessible even for those without a finance background.

Forecasting and Scenario Planning: Prioritise tools that offer robust forecasting capabilities and the ability to model the impact of various business decisions on your agency’s cash flow.

Collaborative Features: Choose a solution that supports multiple users and enables cross-functional collaboration, ensuring that key stakeholders have visibility into your agency’s financial position.

Scalability: As your agency grows, your cash flow management tool should be able to scale with you, accommodating an increasing number of transactions and users without compromising performance or functionality.

How Can I Calculate Operating Cash Flow?

Calculating Operating Cash Flow (OCF) is essential for understanding your agency’s financial health, particularly in terms of cash revenue and cash payments. OCF can be calculated using different methods, but the most common and simplest formula is the indirect method. This method starts with your agency’s net income and adjusts for non-cash expenses and changes in working capital. Here’s a step-by-step guide to calculating OCF:

Start with Net Income: Begin with your agency’s net income, which is found on your income statement. Net income represents the profit after all expenses, taxes, and interest have been deducted from revenue.
Add Back Non-Cash Expenses: Non-cash expenses, such as depreciation and amortization, reduce net income but do not involve actual cash outflows. Add these amounts back to net income to reflect the true cash position. For example, if your agency has $10,000 in depreciation, add this back to your net income.
Adjust for Changes in Working Capital: Working capital represents the difference between current assets (like accounts receivable and inventory) and current liabilities (like accounts payable). Changes in working capital can either increase or decrease OCF:
- Increase in Current Assets: A rise in accounts receivable or inventory indicates that more cash is tied up in these areas, which reduces OCF. Subtract these increases from your calculation.
- Decrease in Current Assets: A decrease in these assets frees up cash, which increases OCF. Add these decreases to your calculation.
- Increase in Current Liabilities: If accounts payable or other current liabilities increase, it means your agency is holding onto cash longer, which increases OCF. Add these increases.
- Decrease in Current Liabilities: A reduction in these liabilities indicates cash outflows, which reduces OCF. Subtract these decreases.
Calculate OCF: After making the above adjustments, the final figure represents your agency’s Operating Cash Flow. The formula looks like this:

Operating Cash Flow (OCF) = Net Income + Non-Cash Expenses − Increases in Current Assets + Decreases in Current Assets + Increases in Current Liabilities − Decreases in Current Liabilities

By regularly calculating and monitoring your OCF, you gain valuable insights into your agency’s ability to generate cash from its operations. This helps in making informed decisions about investments, managing expenses, and ensuring long-term financial stability. Many financial management tools like QuickBooks, Xero, and Grof offer built-in features to automate the calculation of OCF, making it easier for agency owners to stay on top of their cash flow.

Why is Monitoring Agency Cash Flow Important?

Operating cash flow refers to the money flowing in and out of your business on a day-to-day basis. Understanding your cash flow allows you to make informed decisions about everything from staffing to new projects. Here’s why monitoring cash flow is crucial for your agency:

Predicts Future Shortfalls: By analysing cash flow, you can anticipate potential shortfalls and take corrective action before they become crises. This could involve delaying non-essential purchases or negotiating extended payment terms with suppliers.

Improves Decision-Making: Ever had a great opportunity but worried about the impact on your cash flow? Cash flow monitoring empowers you to make strategic decisions with confidence. Knowing exactly where your money stands allows you to seize opportunities without jeopardising financial stability.

Strengthens Client Relationships: Meeting your financial obligations on time is paramount to building trust with clients. Effective cash flow management ensures you can always pay freelancers, vendors, and staff promptly, fostering positive client relationships.

The Challenges of Manual Cash Flow Management

While the importance of effective cash flow management is widely recognized, the reality is that manually tracking and forecasting your agency’s financial position can be a time-consuming, error-prone, and overwhelming task. Some of the key challenges include:

Data Fragmentation: Juggling multiple systems and spreadsheets to consolidate financial information from various sources, such as accounting software, invoicing platforms, and bank statements.

Tedious Processes: Manually inputting data, generating reports, and analyzing complex financial statements to uncover meaningful insights.

Limited Visibility: Struggling to maintain a comprehensive, real-time understanding of your agency’s cash flow due to the inherent delays in manual data entry and processing.

Difficulty Forecasting: Relying on guesswork and historical data to predict future cash flow scenarios, rather than leveraging sophisticated modeling and scenario-planning capabilities.

Lack of Collaboration: Siloing cash flow management within a single individual or team, rather than empowering cross-functional stakeholders with access to critical financial information.

These challenges can quickly become unsustainable as your agency grows, jeopardising your ability to make informed decisions, capitalise on opportunities, and maintain a healthy cash flow position.

Best Practices for Managing Client Payments

Effectively managing client payments is crucial for maintaining a steady cash flow. Agencies often face delays in receiving payments, which can create cash flow challenges. Implementing best practices such as clear payment terms, upfront deposits, and automated invoicing can help reduce payment delays and improve cash inflows. Additionally, using tools like Grof or Elevate for Business can automate the follow-up process, sending reminders to clients and streamlining the payment collection process. By adhering to these best practices, agencies can maintain positive cash flow and reduce financial stress.

Integrating Cash Flow Management with Overall Financial Strategy

Managing cash flow should not be an isolated task but part of a broader financial strategy. Integrating cash flow management with budgeting, financial planning, and performance analysis allows agencies to make more informed decisions that align with their long-term goals. Tools like Grof and Zoho offer comprehensive financial management features that go beyond cash flow tracking, enabling agencies to create budgets, monitor financial performance, and adjust strategies as needed. By viewing cash flow management as a component of your overall financial strategy, you can better align your agency’s operations with its financial objectives.

Conclusion

Managing your agency’s operating cash flow is essential for long-term success. By leveraging the right tools, you can gain better control over your finances, avoid cash flow problems, and ensure your agency’s growth and stability. Whether you choose Xero, Grof, QuickBooks, Elevate for Business, or Zoho, each of these tools offers unique features to help you effectively manage your cash flow. With these tools at your disposal, you can focus on what you do best—running your agency and delivering outstanding results for your clients.

Searching for an Efficient Expense Management Solution?

Stay on top of your business expenses with Grof’s streamlined expense management solutions. From tracking daily transactions to setting spending limits, Grof’s intuitive platform provides everything you need to manage expenses effortlessly. Gain real-time insights, reduce manual errors, and enhance your financial decision-making with ease. Discover how Grof can transform the way you manage your expenses today!