What is Cash Flow Banking and How Does it Work?

Cash flow banking is a way of managing your money that can help you to avoid overdrafts and save money on bank fees. It works by organising your income and expenses into different categories, so you can see how much money is coming in and going out each month. This makes it easier to keep track of your spending and make sure you have enough money to cover your bills.
Cash flow banking can be used for personal finances or business finances. For businesses, it can be especially helpful in managing cash flow and avoiding the need for short-term loans. There are a number of different ways to set up a cash flow banking system, but the most common approach is to break down your expenses into three categories: fixed, variable, and discretionary.
Fixed expenses are those that are the same each month, such as rent or mortgage payments, car payments, and insurance premiums. Variable expenses vary from month to month, such as grocery bills, utility bills, and gas prices. Discretionary expenses are those that you can choose to spend or save money on, such as dining out, entertainment, and clothing.
To set up your own cash flow banking system, you need to track your income and expenses for at least three months. This will give you a good idea of how much money you typically spend in each category. Once you have this information, you can create a budget that outlines your monthly expenses. You can then use this budget to track your progress and make adjustments as needed.
If you're struggling to get your finances under control, cash flow banking may be a good option for you. It can help you to see where your money is going and make changes to your spending habits. By using a cash flow banking system, you can avoid costly bank fees and make sure you have enough money to cover your bills.