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Meaning Of Cash Flow And Its Importance?

by admin on July 2, 2015 Comments Off

Cash flow is the amount of money that comes in and out from a company. It’s like a water tank that flows from the top and flows out down the bottom. Cash inflow is the lifeblood of your growing firm. This cash inflow comes in like the payments from existing clients, investors, receipt of a loan or interest related to savings or investments. Cash flow is very important because this is where you acquire budget or funds that keep your company running. The cash flow also allows you to determine the performance of your business and helps you monitor daily revenues, expenses, deductions, employee salary, bills, payments, credits and other financial transactions.

Ideally, a business should always aim having a positive cash flow. Positive cash flow means your business is running smoothly with great numbers. High positive cash flow is even better. It provides you the advantage to upgrade your company, hire more employees or associates and open another location. However, we need to be oriented that business may sometimes experience negative cash flow. It means that there are more money flowing out from the business rather than coming in. The best intervention for this is to get organized and create a strategic business plan. First you need to check the cash you have in hand. You can start using this by creating a list of all the one-time charges that have to be paid. Make sure to settle down the incorporation fees, legal permits and accounting licenses, establish a rental agreement or purchase a property, invest on marketing materials, stock up initial supplies and equipment, etc.

Next you need to determine how much cash resources you’ll earn monthly. These can be in a form of client payments, estimated revenues or projected sales, incoming loans and or investments from partners. If you started out the business you need to monitor the numbers religiously and do project sales carefully. This is where proper bookkeeping services take its role. However, if you already purchased a stable existing business, then you have a distinct advantage in sales. Although, the history of a stable company does not really predict the future, however you can modify or make the existing company more stable and design what its future would look like. Finally, you will need to carefully assess your monthly expenses and revenues. To make sure you have clean books and accurate records you need to have the advance bookkeeping and accounting software. These tools will help you monitor all the financial transactions and day to day expenses at any given time or anywhere even beyond business hours. Xero Accounting is a good sample of accounting software. Accounting Services Singapore businesses are already using this reliable accounting technology. This computer related accounting software also allows you to do marketing, website hosting, process online payroll, monitor client transactions, issue invoices promptly, receive payments, obtain receipts, manage loan payments and gather real time business data. To keep a stable company make sure to pay the bills on time. It’s a smart way to build trust and keep a strong relationship with your creditors.

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