Cash flow management: why sound cash flow projections make it easier to grow your business.

Did you know that keeping inaccurate or inadequate cash flow records can hurt your chances of expanding your business?

It’s a fact of business life. Those who maintain precise records with accurate cash flow projections often are rewarded – especially when it comes to dealing with financial institutions. Those who don’t are often penalized.

So, when applying for a loan, you’d better have your ducks in a row. That includes sound cash flow management and cash flow projections. These also can help ensure you always have enough available cash to pay your operational expenses (as can invoice factoring), plus spot potential cash flow trouble in advance (and give you the chance to take action).

Cash flow management for small businesses relies on three key financial statements.

As we mentioned in a previous blog about cash flow management, three types of financial statements are particularly helpful to small business owners. But, let’s focus on one of them: cash flow statements.

A cash flow statement reviews your net cash increase or decrease over a certain period of time (usually quarterly or annually). It doesn’t concentrate on your profits, but on your cash levels. This report provides an accurate reading of the cash that’s coming in, as well as the amount available for salaries, bills and other expenses.

Most cash flow statements feature these three sections:

  • Financing activities: this looks at the financing of your company. For instance, business loans would be included as a source of incoming cash. Loan payments would be listed as outgoing cash.
  • Operating activities: this section reviews both sales and expenses (including non-cash items) to derive a net income figure.
  • Investment activities: this reviews the money your company took in – and paid out – on investments, which can include individual stocks, bonds, mutual funds, real estate, equipment and more.

Discover more by taking advantage of free business advice from trusted sources.

Savvy business owners can accumulate a wealth of free business advice on how to successfully operate a company. For instance, the U.S. Small Business Administration (SBA) offers outstanding, unbiased information, including tips on how to expand your company, invoice factoring and the importance of intelligent cash flow management.

MP Star Financial also provides free business advice about business expansion. In fact, we even have a free e-book called “Grow Your Business Through Invoice Factoring.”

Remember: be sure to keep accurate, detailed records. Doing so not only helps your daily operations, but your longer-term outlook as well.

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