Managing Cash Flows #01 - Importance of Cash Flow and its Management


Easy Techniques to Assess Existing Cash Flows

If you don't learn to manage cash flows, the lack of it will start managing you.

Proper management of cash flow is one of the crucial functions of an entrepreneur. It is a matter of choice - do you want to be controlled or be able to control your cash flows? If you want to be in control, this video series is important for you.

Cash flow is the money that flows in an out of your business. Managing cash flows is about being able to control the timing of inflows and outflows to be able to retain cash balance at your disposal.

This sounds like a very complex process, but can be achieved with some simple techniques. Cash is needed in business for everything from paying salaries to buying material to administrative expenses.

Let's first classify the types of inflows and outflows that a business generally has :

Inflows:

  • Payments received from customers
  • Interest received on loans
  • Interest on bank deposits
    • Outflows:
  • Money spent on buying assets such a new machinery, computers, office equipment etc. Assets.
  • Money spent on providing salary to the employees
  • Payment made to suppliers
  • Wages paid to daily workers
  • Transportation Cost of getting raw material or delivery of products to customers
  • Interest and EMI of Loans

When the timing of inflows and outflows in mapped on a table (you can use a simple spreadsheet to do so), it becomes a cash flow statement reflecting the daily, weekly, or monthly cash balance available to the entrepreneur to either reinvest in operations or to put aside for future use.

Knowing the timing of inflows and outflows is the most critical aspect of managing the cash flow. In the upcoming videos we will take you through how to assess the timing of cash flows and make amendments to the timing to ensure that there is a positive cash balance at all times.

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