The common terminologies of cash flow

Whatever be the size of the business, the cash flow always poses an important aspect to the business. The entire business owner will make their best effort to make the cash flow as smooth as possible.  A smooth cash flow for a business indicates the business is running properly and it can achieve its goal. In order to maintain a smooth cash flow for your business, it is very important to understand the basic of the cash flow phenomenon. Here we are presenting the common terminology associated with the cash flow for your better understanding.

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Cash flow: The cash flow term is a very common term to understand. It indicates how the cash is flowing for the business. Literally how much money is coming to your business and how much is going outside towards your business. All the income for the business and the expenditure will also comes under the purview of cash flow. Generally the cash flow is calculated over a period of time.

Cash Flow Terminologies

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Total cash balance: it indicate the total amount of money you have for your business and the amount of money you have in hand for the operation of your business. Generally this money is available to legitimately expend, or the amount of money the business owes to a financial institution and its allies business. The over draft facility obtained by the bank will also comes under the cash balance.

Cash flow statement: The cash flow statement is a financial and systematic representation of the total movement of cash (inward and outward) for the business. Generally the statement is prepared over a period of time. While preparing the cash flow statement for the business activities like cash flow from selling goods and cash flow from paying expenses will be taken into consideration. At the same time cash flow from sale or purchase of assets and the change in the fixed assets will also included in the cash flow statement.

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Operational cash flow: The operational cash flow is the cash flow which accounts towards the operation of the business. In fact all the unexpected transaction will not be taken into consideration for the cash flow statement. During the course of the business all the profit and the deprecation for the fixed asset of the business also figures in the cash flow. The revenue and profit will be added where ass the depreciation will be reduced to the cash flow statement.

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Cash flow for non business activity: It is not mandatory that all the entry for the cash flow will be from the business activity. There are some other non business activity is also included in the cash flow statement. Some common activities like installation of plant and machinery and furniture and fittings and all together with an increase in or repayment of business loans will also figure on the final cash flow statement. Finally the profit Vs cash aspects will be taken into consideration for the final presentation of the cash flow statement.

Cash Flow Terminologies

Effective cash flow management techniques for the survival of your business

The term cash flow is derived from the term cash flow budget. The term cash flow is a pretty self explanatory term and to b simple the term cash flow gives a future prediction of the proposed payments and receipt. If you own a business house or run any business organization it is very important to understand the term cash flow, so that you can manage the business effectively.

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At the same time the cash flow also include any sort of major expenditure and purchase of any machinery. If you are going to plan for the business in short term or long term the requirement budget and expenditure for the planning will also comes under the cash flow statement. When it comes to the cash flow statement, maximum care needs to be taken while preparing the cash flow budget. The cash flow statement mainly composed of three aspects and here we will educate you about the aspects of cash flow statement.

Measure it perfectly: Most of us have a conception that the profit and loss statement is same as the cash flow statement. However the same is not true both the terms are very allied and different from each other. The cash flow statement is a mere indicator of the movement of cash in and out for your business.

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Know the root cause of the cash flow problem: At some point of time you might face some problem with the cash flow for your business. Hence whenever you have noticed any problem with the cash flow immediately know the main cause of it and get it rectified. The cash flow statement is a wonderful tool for your business to analyze where to invest and where to not. Most of the renowned economist has recommended investing things like people, equipment, facilities, or inventory and that takes money out of the business for a successful business house.

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Making a fool proof cash flow strategies: As of now you have learned the fundamental aspects of cash flow. Now it’s time to prepare strategies of cash flow for your business. While preparing the strategies you have to keep in mind that the strategies should be fool proof and it should suit to your business. Minimization of the expense is the first step for a wonderful cash flow statement. And any business owner will love to minimize the expense. As far as expenses is concerned, it can be minimized it various ways. While procuring any raw material, you can consult to a large number of vendors and pick a vendor who will give you maximum discount. Similarly take the necessary sets to minimize the operation expense. Similarly scope for the inventory should also be taken care of. As a result of which you business house can face any sort of worst market scenario. The final step is to implement the cash flow statement smartly so as to ensure for a successful business house.