{"id":2779,"date":"2018-08-02T15:58:06","date_gmt":"2018-08-02T12:58:06","guid":{"rendered":"https:\/\/www.lending-express.com\/blog\/?p=2779"},"modified":"2019-02-17T15:39:40","modified_gmt":"2019-02-17T13:39:40","slug":"how-to-keep-your-cash-flow-flowing","status":"publish","type":"post","link":"https:\/\/www.become.co\/blog\/how-to-keep-your-cash-flow-flowing\/","title":{"rendered":"How to Keep Your Cash Flow Flowing"},"content":{"rendered":"

How to Manage Your Small Business\u2019s Cash Flow<\/span><\/h2>\n

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Cash flow is essentially the water pump of your company, pumping cash around your business to keep it alive. You\u2019re going to want to keep this number positive, very positive. Eliminating and better yet, preventing, business cash flow problems is achieved in two crucial ways: smart organization and planning. To effectively manage your small business cash flow, you\u2019ll need to learn how to prepare for the worst case scenario and get on top of your organization game. <\/span><\/p>\n

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Here we\u2019ll outline how to manage cash flow and keep your business happy and healthy all year long. But first…<\/span><\/p>\n


\n<\/span>What\u2019s meant by \u201ccash flow?\u201d<\/span><\/h2>\n

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Business cash flow = <\/i><\/b>the total amount of money going into and out of a business.<\/i><\/b><\/p>\n


\n<\/span>With a positive cash flow, you can grow your business by making new investments, hiring new staff, opening a new location, getting better equipment etc. A negative cash flow, on the other hand, has more money going out than coming in. <\/span>
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\n<\/span>Picture your cash flow as a water tank. Water goes in at the top and drains out the bottom. You want that tank staying nice and full (we can keep dreaming of it overflowing), and in order to do that, you need to keep more going in than seeping out. Easy right? Well if it were that easy we\u2019d sign out here…but there\u2019s still more of this article to read!<\/span><\/p>\n

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Profit vs cash flow<\/span><\/h2>\n

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You\u2019re not alone if you get confused between cash flow and profit. The key difference lies in the <\/span>source <\/span><\/i>of the cash transaction and the accounting basis. <\/span>
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\n<\/span>The profit of a business, also known as a business\u2019s net income is the profit minus gross income or sales of a business and its expenses. In other words, it\u2019s what remains from sales revenue after all expenses have been subtracted. Cash flow, on the other hand, is simply the money flowing in and out. <\/span><\/p>\n


\n<\/span>Does profit equal good cash flow?<\/span><\/h2>\n

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In short, no.<\/span><\/p>\n

Did you know, a company can actually have a negative cash flow, yet have a large profit if the business owner takes cash out to pay personal expenses or even uses it to make new investments? A company can even have a positive cash flow while having no profit – raises eyebrow. How you ask? If the cash comes from sources <\/span>other <\/span><\/i>than income, such as a business owner putting in their own money or if they take out a loan then it\u2019s possible (these are equity or liability transactions). <\/span><\/p>\n

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Best practices for cash flow management<\/span><\/h2>\n

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Now for the bit you\u2019ve all been waiting for. Here we\u2019ll outline some solutions and preventative measures for cash flow problems:<\/span><\/p>\n

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\"small<\/p>\n

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Organize and plan<\/span><\/h3>\n

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First of all, you\u2019ll need to set your foundations right, which without, your business cash flow, and the business itself could come crashing down. You need to make sure that you\u2019re as accurate and honest with these numbers as possible to better plan. <\/span>
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\n<\/span>Start by looking at the cash you have available now:<\/b><\/b><\/p>\n