Cash Flow Basics

Do you know how your money moves throughout your business? Many business owners do not.  

Simply put, having a positive cash flow means that more money is coming into the business than going out. 

Cash flow is more than revenues in and expenses out and can even be more important than profit when determining a small business’ performance. You may have a high overall profit, but if cash flow is low, you may still face issues like overspending or excessive inventory. Gaining insight into your cash flow can help in a few ways: 

• Improve forecasting and decision-making. You may feel as though your business is in a strong position, but issues like late invoicing will show negatively on a cash flow statement and decisions spending finances need to be delayed. 

• Understand where and why you are spending money. A profit and loss statement doesn’t show exactly where you are spending your money or the reasons behind it. Analyzing, understanding, and managing cash flow supplies the ability to identify areas of the business where costs can be reduced. 

• Scale at the right time. Growth of your business is exciting and requires a lot of cash. Office space, hiring employees, acquiring equipment, obtaining equipment, and many more aspects must take place prior to the results of increased business. When funds aren’t available to match your speed of scaling, issues occur. Managing cash flow effectively lets you know the right time to take actions needed for growth. 

Our team helps our clients analyze their cash flow, strategize, and make decisions that best benefit their operations.