Notes On Cash Flow Management - 2002 Words

Introduction to Cash Flow Management Cash is king when it comes to managing the financials for a small business. Managing cash can easily make or break a company in the early stages of the business cycle. Cash flow refers to the amounts of money moving in and out of the business. When an entrepreneur starts his business, one way or another capital must be raised in order to fund the daily operations of the business. The business can either have a positive cash flow where the company brings in more money than it spends (which is a sign of god financial strength for a company), or it can have a negative cash flow that is caused by spending more money than what is taken in (the largest cause of business failure) (Reuters 2016). To better†¦show more content†¦These four steps focus in on the key elements for cash flow analysis of accounts receivable, accounts payable, and managing shortfalls. II. Measuring the Cash Flow Preparing future cash flow projections each year, quarter, month, and even weekly depending on your company’s current financial position gives an accurate cash flow forecast that can alert the business of potential pitfalls before they actually happen. Cash flow plans are educated estimates combining a number of factors namely accounts receivables (what customers and clients owe you), accounts payables (what you owe vendors), and potential threats to your cash flow. A cash flow projection starts with cash on hand at the beginning of the period along with other receivables that are likely to be collected within the period. While gathering this information, you will learn detailed information about your finances, creditors, investors, etc. Essentially, you are inquiring to figure out how much cash in the form of customer payments, interest earnings, different fees, partial collections of bad debts, and other sources are you going to get in, and when. The second most important aspect of creating a cash flow projection is having an in-depth, detailed knowledge of upcoming cash inflows and outflows. The owner (or person creating the cash flow) should not only know when each dollar is