Analysis of cash flows Cash flow and systems
Any business owner will tell you that the management of cash flows using the cash controls combined with effective business systems cash flow is of the utmost priority.
The cash flow definition
The cash flow is the term used to describe the different elements of the cash received by an enterprise, and all payments made by a company. This includes the processes that generate these flows.
The cash management
Understanding that cash flow is not a passive thing, and management needs, using information in the form of reports and bank statements, and take appropriate measures in the wake of the information contained in these reports is the key the success of cash management, and therefore critical to the survival of the company.
Identify cash flows
First, you must identify all possible means for your company to receive cash. After a little thought this is our list:
Cash sales, the collection of debts owed to us, income from investments such as interest or dividend payments, Capital Raising activities, including products from loans to small businesses, or to venture capitalists in the company under the form of hotel loans or equity, and revenue from the sale of any assets such as property, vehicles and other machinery.
The outflow of funds
Like our personal finances, it seems increasingly afford the money that his recovery in goods purchased for resale, raw materials to make our product, salaries and wages to pay those who produce, sell or administer our business, operating expenses including utilities, travel and marketing. The purchase of assets to use in the company. Taxes (2 only certain things in life - death and taxes). Repayment of loans. And dividends paid to investors who have invested money in the company.
It is a rather long list, and it is not surprising that track individual cash flow, and equally important, the timing of these flows requires several pieces of information management.
The management information requirements
As a business owner you have a pretty good idea of cash flows for your company, perhaps to the point where you do not feel it is necessary to put everything on paper.
It's easy with the distractions of day to day business to overlook or forget simply indispensable cash related issues, and it is important to recognize you need a good analysis of cash flows on an ongoing basis, as is the key to saving money on interest and unnecessary costs, and your taking the situation will determine your long-term survival of the company.
From your identification of sources of cash inflows and outflows above, you have a series of reports to measure and respond to the cash cycle of your business.
Essential cash control information
Customer information.
A list of clients, and our agreement to extend credit, the amount of the credit limit.
A list of customers and the amounts they need us. A certain idea of when we can expect to receive these amounts and an indicator of old or delay the amounts due. (Most small business book-keeping software product such reports as standard - but consult).
A history of payments made by each customer. We know, therefore, their mode of payments, and can be sure to detect any disturbing trends.
Providing information.
A list of all the suppliers of any agreed credit terms and credit limits.
A register of payments we have to be done and the timing of these payments. (This information we expect to exit the business accounting software)
You'll also need a recent bank statement, and you can then use this information to make a weekly analysis of cash flow, often referred to as a forecast of cash, taking the latest bank balance, and adding any because of revenue, and because of payments in the week.
This gives you an idea of where the deficiencies or surpluses are expected, and you can then take corrective measures to remedy any problem.
The use of such cash flow forecasts in advance of any given period prevents you from suddenly in a "surprise" situation, and help you retain effective control over the destiny of your business.
Any business owner will tell you that the management of cash flows using the cash controls combined with effective business systems cash flow is of the utmost priority.
The cash flow definition
The cash flow is the term used to describe the different elements of the cash received by an enterprise, and all payments made by a company. This includes the processes that generate these flows.
The cash management
Understanding that cash flow is not a passive thing, and management needs, using information in the form of reports and bank statements, and take appropriate measures in the wake of the information contained in these reports is the key the success of cash management, and therefore critical to the survival of the company.
Identify cash flows
First, you must identify all possible means for your company to receive cash. After a little thought this is our list:
Cash sales, the collection of debts owed to us, income from investments such as interest or dividend payments, Capital Raising activities, including products from loans to small businesses, or to venture capitalists in the company under the form of hotel loans or equity, and revenue from the sale of any assets such as property, vehicles and other machinery.
The outflow of funds
Like our personal finances, it seems increasingly afford the money that his recovery in goods purchased for resale, raw materials to make our product, salaries and wages to pay those who produce, sell or administer our business, operating expenses including utilities, travel and marketing. The purchase of assets to use in the company. Taxes (2 only certain things in life - death and taxes). Repayment of loans. And dividends paid to investors who have invested money in the company.
It is a rather long list, and it is not surprising that track individual cash flow, and equally important, the timing of these flows requires several pieces of information management.
The management information requirements
As a business owner you have a pretty good idea of cash flows for your company, perhaps to the point where you do not feel it is necessary to put everything on paper.
It's easy with the distractions of day to day business to overlook or forget simply indispensable cash related issues, and it is important to recognize you need a good analysis of cash flows on an ongoing basis, as is the key to saving money on interest and unnecessary costs, and your taking the situation will determine your long-term survival of the company.
From your identification of sources of cash inflows and outflows above, you have a series of reports to measure and respond to the cash cycle of your business.
Essential cash control information
Customer information.
A list of clients, and our agreement to extend credit, the amount of the credit limit.
A list of customers and the amounts they need us. A certain idea of when we can expect to receive these amounts and an indicator of old or delay the amounts due. (Most small business book-keeping software product such reports as standard - but consult).
A history of payments made by each customer. We know, therefore, their mode of payments, and can be sure to detect any disturbing trends.
Providing information.
A list of all the suppliers of any agreed credit terms and credit limits.
A register of payments we have to be done and the timing of these payments. (This information we expect to exit the business accounting software)
You'll also need a recent bank statement, and you can then use this information to make a weekly analysis of cash flow, often referred to as a forecast of cash, taking the latest bank balance, and adding any because of revenue, and because of payments in the week.
This gives you an idea of where the deficiencies or surpluses are expected, and you can then take corrective measures to remedy any problem.
The use of such cash flow forecasts in advance of any given period prevents you from suddenly in a "surprise" situation, and help you retain effective control over the destiny of your business.
