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The importance of cash flow

It is crucial to keep track of your cash flow.

Whether it's personal finances, or in business, it is crucial to keep track of your cash flow. Unfortunately if you spend, spend, spend and don't have the money coming in to cover this expenditure, it's belly up or borrow time.

Most companies have their quiet times over the month, so it's important to forecast what you're receiving and what you'll need to pay out. A 2-3 month projection of cash flow will help you identify any shortfalls, juggle the odd payment date if necessary and provide a much clearer view of your finances.

Keeping on top of aged debtors, or customers who have a history of paying late becomes vital if you're experiencing some shortfall. As does ensuring you can afford purchases that could be delayed another month or two.

If you're keeping a running spreadsheet or similar app, most importantly is to ensure it's accurate! One missed tax return can mean an awful lot of money to be found at the last minute. You'll also be able to see when you need to put money aside for such tax returns or large expenses.

A little discipline in keeping in maintained and you should have a much clearer view of accounting liquidity, as well as the ability to plan for future growth.

Here's some information about cash flow you might find useful:
What is cashflow management?
What is a cashflow statement?

~ Rachel

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