To make heads or tails of how your business is doing is hard for anyone starting out. All of these financial statements like balance sheets, income statements, and cash flow statements can go over just about anyone’s head, especially for first-time business owners.
Unlike income statements that measure your monthly profitability, a cash flow statement basically tells you where your money is going. And carefully tracks how much money you receive from your sales, as well as how much is spent on operating your business.
The 5 key points below break down the importance of cash flow for your business:
1.) Cash flows cannot lie
Cash is very hard to fake. How much money coming in and out of your business is as straightforward as it gets. Basically, what you see in your bank account is what you get.
2.) You know exactly where you stand with your cash
You aren’t left in the dark about where your money went. You will know in detail if you take in more than you spend that your business is doing very well for itself.
3.) Helps you make important financial decisions
Knowing whether you have enough money to cover your staffs’ payroll and your bills, or when to cut unnecessary costs from your business.
4.) Makes sure you are collecting money from your customers
It’s a great way to assess to find see if you are collecting payment from your customers because a profit and loss statement will not tell you if you’re getting paid or not, but just keep track of your monthly business activity.
5.) Determines if you have enough to make another investment
You will be able to see if there’s enough extra money in your account to invest in another piece of equipment to further grow your business.
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