The Importance of Cash Flow

Jul 15, 2021

Cash flow is vitally important to the success of any business and is often the most misunderstood aspect of business reporting. Cash flow is not limited to the detailed schedule of your company’s incoming and outgoing cash you see annually; it needs to be your ongoing indicator of business success. Monitoring cash flow effectively will allow the business to thrive regardless of the current economic environment.

Cash flow refers to the net amount of cash that a business is currently generating. In other words, it is the difference between cash incoming and outgoing. It is also sometimes referred to as the cash that is moving or “flowing” within a business. As one of our Consulting Partners, Jonny Baker, describes it, “Cash flow is the… arbiter of what the enterprise is actually creating in value”.

Cash flow is of particular importance to an organization because it reflects the reality of your situation and your success or lack thereof. It is a key indicator to  the value of a firm based. Being able to accurately time and place your cash flows is necessary to be able to prepare for the liquidity needed in a particular situation, whether it is for strategic purposes or for survival.

To enhance a business owners understanding of cash flow management and its importance, see what our consulting partner, Jonny Baker has to say about it. He takes you through the importance of cash flow, tips on how to calculate it and find ways to ensure the success of your organization through cash flow management.

 

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