The Basics Of Cash Flow

If you have a checking or savings account, you deal with cash flow on a personal level. Start a small business, open a checking account, and now you are dealing with business cash flow. When you are just starting a business, the game is easy. Spend as little as possible and make as much as possible. Usually the latter is a little more sluggish than you would like it to be, so not spending money on silly things is very important. If you cannot do business without spending money on something, by all means come up with the money and spend it. But there are so many opportunities out there to spend money for your business, and not for things to build your business, that you will find yourself broke very quick if you do not watch it.

After your business has grown (and always), cash flow is important to monitor as it may not be as straight forward as it was early in the business.  There may be accounts receivable and accounts payable to work with, as well as just managing a basic checking account.  In other words, there are many more moving parts to cash flow and it is easy to find yourself having a difficult time meeting all of your obligations.  So having a forecast of cash flow is very important.

Most business software, such as Quickbooks, have cash flow reports and forecasts that can be used to figure out what your spending looked like and what things look like in the future.  You can also do it on paper yourself, but you can make better use of your time with good software.

Please review the following resources for more information:

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