May 6, 2023 Author: Accounts Junction
If you want to improve the financial health of the business then a proper cash flow is important. A proper Cash Flow Management Process is an indicator that the business is having a nice flow of money and there are satisfactory funds. Inefficiency in the cash flow can lead to several complications in operations of the business. Many people get confused that Cash Flow Management and profit are the same things. However, this is not right, profit is the money remaining in the organization by subtracting the expenditure.
Definition:
Cash Flow Management is a process where the tracking and controlling of the cash-in and cash-out in the business is done. The main purpose here is to ensure that the company has a proper tracking of cash outflow and proper cash inflow to ensure sufficient funds with the company.
What are different types in Cash Flow Management Process?
There are two types of Cash Flow Management Process which are listed below:
1. Positive cash flow
Here, the revenue comes in the organization through receivables, sales, etc. and it is more than the cash going out in the form of payables like invoices, salaries, expenses, etc.
2. Negative cash flow
Here, the cash coming in through revenue from different sources are lesser than the cash going out through several types of the payables.
Different types of the cash flow statement:
- Inventory purchase.
- Cash received through different sales.
- Salaries and wages of employees.
- Rent, utilities bill, lease payments, etc.
- Long term debt and loan interest payments
What are the benefits of Cash Flow Management?
Here are some of the important benefits of Cash Flow Management;
1. Easier to make investment decisions
A proper Cash Flow Management helps to get better insight about the patterns of cash inflow and outflow in the organizations. This makes it easier to take the short-term and long-term decisions for the investment.
2. Control the spending
Other types of statements like profit and loss can give a view of the finances of the business. However, it would not give proper understanding about the spending of the business. With Cash Flow Management Process, you can understand where the money is spent and make a strategy to control the cash outflow.
3. Improve savings
It helps to improve the saving of the business that can be further used for the investment. Here, you get a proper understanding of the cash flow and the management can plan out a way to save money without affecting working capital.
4. Improves relations with vendors and other stakeholders
Late payments are not appreciated in the business world, it adversely affects relations with vendors and other stakeholders. A proper Cash Flow Management can improve the payables, helping improve relations with vendors and other stakeholders.
5. Achieve sustainable growth
Understanding the finances, investment, and proper management of cash is very important for every company. If there is an improved cash flow process then it can be easier to achieve sustainable growth.
These are some of the benefits of improving the Cash Flow Management for the business. If you find it difficult to effectively manage the cash flow then you must outsource it to experts.
If you are looking for experts to handle the Cash Flow Management of your company, then Accounts Junction is a better choice. They have a very standard Cash Flow Management Process which can improve cash flow. Working with companies from different sectors, they’ve got expertise in getting better with cash flow. Accounts Junction is a well-known accounting services providing agency across the globe.
