What Is Cash Flow
Cash flow simply means the amount of money moving in and out of a business. In a business setting, you’re naturally going to be spending and generating money. Hence, it can be difficult to see if your company is truly profitable or if you need to make changes. Needless to say, its important to manage your cash flows to help your business grow.
Know Your Business’s Liquidity Position
Analyzing cash flow allows business owners to learn about their company’s liquidity position. Liquidity position means the ease or difficulty at which assets can be converted to money so short-term financial obligations can be met. Staying on top of your cash flow projections can help you understand your company’s true performance. This helps you to make smart business decisions and stay on top of outstanding short-term debts.
Analyze Your Company’s Cash Flow
Understanding your company’s cash flow is a fairly easy procedure. You can analyze your cash flow every month, quarter, or year. First, you determine your cash balance at the beginning of the period. Then compare that initial number with the new number at the end of the period. At that time, you can determine whether you have a negative or positive balance. This can be achieved by subtracting the smaller number from the larger number.
Ideally, your cash flow statement should be higher at the end of the period. Even though money is “flowing” in and out of your business, you’re still generating profit. If your cash flow statement is negative, you may need to make some changes to reduce your overhead expenses so you always have liquid assets available. After all, unforeseen expenses may occur.
QuickBooks makes generating a cash flow report a fast, straightforward process. You simply input your data, and the software does the work for you. Generating regular cash flow reports really helps you to understand the inner workings of your business. It’s fast, easy, and inexpensive. Empower yourself to make positive ongoing business decisions so your company can continue growing consistently.