Cash Flow Reigns

Managing the finances of a small business can get complicated quickly. You need to become familiar with standard financial documents, pay attention to profits, and make the most of the business’s assets. You have to be thinking and planning ahead. Most of all, you need to be concerned about maintaining cash flow.

Cash flow is the movement of money in and out of your business. The process includes:

• •Inflow-This generally comes from your core operation such as the sale of goods and services. It can also come from other sources like loans, lines of credit, and/or asset sales.
• •Outflow-takes the form of business expenditures, loan payments, and business purchases.

It’s crucial to balance these two figures and maintain a reasonable balance of cash at all times. An effective cash flow system will help you manage funds to cover operational expenses and help you foresee potential problems.

Many small businesses have ended up in bankruptcy because the amount of cash coming in didn’t compare favorably with the amount of cash going out. Without good cash management, businesses may not be able to make the investments that are necessary to compete. Or they may have to pay more to borrow money to continue operating, or they max out their line of credit and still have the same operating issues.