Understanding Your Cash Flow for the Small Business Owner

The real poverty of typical businesses is found neither in their low income nor in costly essential expenses but rather in not understanding their own cash flow. What is a cash flow statement and why is it so important? A cash flow statement is part of your business’s financial statements, which include these: An income statement A balance sheet A cash flow statement However, a cash flow statement isn’t just something you prepare and put in a drawer to never look at again. Used correctly, it can be a vital tool for managing your business and planning ahead for financing needs. Ideally, you want to maintain a positive cash flow at all times. This ensures you have the funds available that you need to pay your bills, pay employees, and purchase inventory or assets in a timely fashion. In reality, of course, many businesses find that from time to time, their cash flow is negative. Or perhaps it’s an ongoing problem: You are doing fine on paper in terms of profitability, but somehow find that you frequently run short of cash. Reviewing your cash flow statement regularly can help you spot this type of cyclical pattern in your business and prevent a cash flow emergency. Make plans to attend now!