Chartered Accountants & Tax Specialist
General update by IBBZ Accounting on latest tax news, business growth and technology tips.
You might think “I am in a small business, why I need a cash flow?” But small businesses are the most that require cash flow.
Many analysts stated that the main reason for small businesses not growing is because of poor cash management.
Cash flow gives you a broad view of where your cash are going and importantly from where it’s coming from. Because you have complete view of your expenses and incomes you can plan your business activities accordingly.
A positive cash flow means business has cash available after expenses.
To grow your small business, you need to invest in things which can give you satisfactory returns. The investment activities often require significant funds; however, they are one-off costs to the business. A healthy cash flow often shows inflow of cash from investment activities.
Small businesses usually face financial hardship during its inception. There are fixed expenditures which they have to pay without fail. Cash flow helps in preparing business owners to plan their expenditure and gives them a clear picture of what they can expect while doing a business. It also facilitates in decision making for future activities.
Businesses do face emergencies where they need to pay expenses right away. These expenses are unexpected and unforeseeable. Having cash on hand will help meet these expenses easily. Positive cash flow works as an emergency fund for your business.
Banks and lenders look at cash flow in order to lend money to small businesses. A cash flow is a complete guide for lenders what are the business activities and how much business is spending and receiving money. A positive cash flow will most likely approve a loan than a negative cash flow for your small business.