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18/09/2019 08:57:24 AM

Monitoring Cash Flow

Cash flow is the ($) lifeblood of all businesses and people. If you learn to manage cash flow, you and your business will never be short of cash! Simply put, cash flow is all about the timing and amount of cash receipts and cash expenditures for any given period. If cash comes in faster than it goes out, and at a greater rate, you and your business will never be short of cash!

Learn and understand the distinction between the income and cash flow statements: The income statement reports all revenue and all expense transactions when they are occur, but it does notindicate whether or not the cash was actually received or spent. If a sales transaction occurs and the corresponding payment is not simultaneously made, this creates an accounts receivable. If an income statement expense is reported but not actually paid for, this creates an accounts payable. There is a big difference between the two-cash flow!

Sales

$XXX

Cash in

$XXX

- Expenses

$XXX

- Cash out

$XXX

= Net income

$XXX

= Net Cast Flow

$XXX

Net cash flow is arguably “net income” for all businesses and people (and bankers). Whether it is a loan officer evaluating a financing request, a business owner evaluating a proposed new venture, or a private individual planning for the future, net cash flow is almost always a key deciding factor in those decisions.