A small business owner should always be thinking about cash flow, and it starts with knowing the answers to some basic questions. We have compiled a list of these questions in our eBook, so you can get started right away!
The “cash flow statement” is one of the most important statements in a business. It’s a document that helps you understand how your business is doing financially and it can help you make better decisions about what to do with your money.
Flow of funds. Perhaps you studied it for a semester or two years ago. Perhaps your company has always been cash-flow positive, and you’ve never given the idea any consideration.
Or maybe you’ve never heard the phrases together before.
Download our free e-book, Cash Flow 101: A Complete Guide to Cash Flow Analysis »
Whatever the situation may be, a short reminder is in order:
Simply put, cash flow is the difference between the revenues a company produces (and receives) and the expenditures it pays out over a certain period of time. Businesses generate revenue in a variety of ways, including sales, finance, and investment returns. Supplies and services, as well as utilities, taxes, and other expenditures, are all expenses.
However, company owners can’t anticipate the future, especially when it comes to any unexpected costs (for example, a vehicle breaking down and having to be replaced, or a data breach necessitating an increase in IT expenditure). They also have no guarantee that their customers will pay their invoices on time.
When these uncontrolled factors are added together, an obvious conclusion emerges: cash flow issues plague many companies. And the evidence backs it up: three out of every five companies have cash flow issues, according to a recent study. Even though these problems are relatively uncommon, company owners are better off doing all they can to prevent them.
5 warning signs of potential cash flow issues:
Cash flow issues may be in the horizon if your company exhibits any of the five signs listed below.
- Your receivables are too high.
- You have an excessive amount of merchandise on hand.
- You’ve taken your company too far.
- Your revenue is dwindling.
- Your company just isn’t lucrative.
Download our free eBook to learn about cash flow fundamentals, how to create a Cash Flow Statement for your company, and how to manage your cash flow effectively.
Learn the fundamentals now to prevent future cash flow issues.
