How to plan cash flow for your business:- www.deekpay.com

Cash flow may not be able to prevent the failure of a bad business, but it can definitely help a solid business succeed. If you can't manage cash flow effectively, then you can't manage a successful business. The first thing you need to understand is that cash flow is not the same as revenue. You only get real cash when you receive payments from your customers.

What is cash flow?

Cash flow is a statement detailing how your business takes in money (whether from sales or investments) and how it spends it (for operations, investments and tax payments). It is therefore vital for your online business to manage the amount of cash flowing into and out of your system.

While cash flow is the primary element that defines a company's financial position, not all measurement aspects need to be included. You need to understand the strengths, weaknesses, and capabilities of each approach that relate to the unique proposition of cash flow.

What is a cash flow statement?

Together, the balance sheet, the income statement and the cash flow statement constitute a company's complete financial statements. The balance sheet is a snapshot of assets and liabilities, while the income statement provides an overview of a company's performance over a financial life cycle. The cash flow statement, however, is a reconciliation book that reconciles the other two statements. It actually proves the veracity of the balance sheet and the income statement.

You need to make sure that your business never runs out of working capital. All you need to do is control your cash flow and maintain a stable budget to drive your business. Here are some tips to help you create a cash flow plan for your business:

Reading and analysing monthly bank statements

Simply by comparing the beginning and end-of-month balances, you can see if cash flow is positive or negative. So start reading your company's monthly bank statements. If the cash balance is higher than at the beginning of the month, then your cash flow is positive. If the balance is lower, then the company may be facing negative cash flow.

"Cash flow is nothing more than the accumulation of monthly profits plus changes in accounts payable, accounts receivable and inventory."

Together, these three elements make up your monthly bank statement.

Create a cash flow budget

If your company's cash outgoings exceed its income, then this is really something that needs immediate attention.

Determine the cash inflow (revenue): record revenue as soon as your goods or services are sold. Don't forget to record expenses as they are incurred. Firstly, consider your profit and loss budget when forecasting revenue for the month.

Determining cash outflows (expenses): Your cash outflows depend on the products and areas in which you operate. It includes fixed costs such as salaries, rent, and telephone bills. The cost of managing inventory, expenses of various departments, operations and fulfilment together make up your cash outflow.

Projected cash flow statement

You can forecast cash flow by considering more segmented modules such as business units, payment methods and customer groups. This helps you identify problem areas that require immediate action. Using these insights, you can forecast the amount of cash you will receive from customers and the bills you need to pay to suppliers and other stakeholders.

Faster collection of accounts receivable

You can manage cash flow by introducing a platform to receive online payments from your customers immediately. If you can receive payments in advance, or if you can accept credit card payments, then you can boost cash flow.

Planning inventory flows

Maintaining an inventory that is waiting for customer orders can take a significant amount of cash out of your company's accounts. Therefore, be sure to consider your product and service sales cycle.

The above points will surely help you improve your company's cash flow position. Also, read our blog post on "Impact of GST on Online Businesses".