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Cash Flow Management

Cash flow management is very important to your business because it can make or break you. Specifically, running out of cash is one of the most common reasons why businesses fail. It is not enough simply to have a profit at the end of the month. If you do not have enough operating capital to make purchases when you need them, then your business could suffer an inability to continue functioning.

Adhering to a Cash Flow Plan

That is why it is advisable to involve your accountant.  Your accountant can prepare your tax statements on a monthly basis. The accountant can examine your cash flow plan and make sure that your organization is sticking to it. Another useful benefit is that an accountant is able to analyse variances from the cash flow plan and advise you on adjustments.

With a hectic schedule, business owners may not be able to stick to the projected cash flows.  However, your accountant can help you stay on track by evaluating the projected cash flows at the end of every month.  You also need to remember to give a sufficient amount of cushion to cover any unexpected surprises.  The projected ending cash balance for every month is one of the most important pieces of a cash flow plan.

If there are any variances in the cash flow plan, it is important to take note of them.  Specifically, operational and bookkeeping variations are some of the most common areas where cash flow can differ from the plan.  This will allow you to identify problems and begin improving cash flow at the earliest opportunity.

Projected Cash Flows

Important when starting a business is that projected cash flows be properly anticipated.  A cash flow plan should be essential to any written business plans or proposals.

It is important to note that cash flow is different from income and expenses.  While your income statement may show a profit, the company can still fail due to the lack of available operating capital at the appropriate moments.  That is why projected cash flows should examine the available cash and the timing of expenses.

Remember, the cash flow plan should be updated to reflect the most current information.  It is a living document.  While having the plan gives you a basis, you need to be flexible and not to update based on the actual results.  In today’s economic climate, there is not much room for error.  That is why.  Now, more than ever, having an accounting firm can help you maintain and stick to your projected cash flows.

If you would like to know more about how Tim Nash & Associates can help you with your cash flow plan, give us a call today.

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