Understanding Cashflow
Cash flow is simply the cash that flows in and out of a business. Any cash received is an inflow, and money spent are outflows. Companies can value their business performance based on how much positive cashflow they have, which maximises the free cash flow (cash left after money spent).
A business has inflows of cash from sales, and spends on expenses such as supplies, wages, tax and rent. Positive cashflow after expenses have been paid indicates a company is performing well and is financially flexible, meaning they can invest money into other areas to continue growth, return money to shareholders and ensure future financial protection for the business.
Cash flow is analysed using a cashflow statement. Senior financial officers or accountants will use this to understand how well a business is managing their outflows vs the inflow, and to forecast performance for investors or growth projects.
It is important not to confuse cash flow and profit- cashflow represents a real time analysis whereas profit indicated how much money a company makes overall after expenses are deducted (on record).
How can Soldi Partners help?
Our fully qualified team work closely with businesses, carrying out bookkeeping duties and managing and forecasting cashflow. With an expert eye, and experience in keeping healthy cashflow, we can take on the bookkeeping burden and grant you more time to grow your business.
Want a free copy of a cash flow statement? Download one here.
Want us to discuss any particular topics? Let us know!
Kindest,
Theresa
