Cash Flow Planning

Cash is the fuel that powers a business. Without cash the business will not operate. Without enough cash when the business needs cash the business will operate sporadically or sluggishly. If there is no cash, the business will not operate at all.

WHAT IS CASH FLOW?

In any case, no cash or slow cash, the business owner will eventually lose income and/or investments.

Cash flow is a phrase used to describe the movement of cash in and out of a business. Cash flow specifically addresses:

• Timing – when cash moves in and out

• Amounts – how much cash moves in and out

• Sources – where cash comes from

• Uses – where cash goes

• Relationships – the relationships of business activity to producing or using cash.

WHAT IS A CASH FLOW PLAN?

A cash flow plan is a financial plan that projects future sources and uses of cash in specific:

• Time periods

• Amounts

• Categories of sources and uses

WHAT DOES THE SUCCESSFUL CASH FLOW PLAN FOCUS ON?

• Financial goals, both business and personal

• Reality

• Timing

WHY DO CASH FLOW PLANNING?

1. To set financial goals

2. To measure and monitor business activities

3. To evaluate and assess business strategies

4. To make decisions about the future based on the activities of the past

5. To identify cash weaknesses and cash strengths of the business

6. To identify how much cash is needed and when

7. To identify risks the business owner might take

8. To identify rewards the business owner might receive

9. Lenders require a cash flow plan