Why is Cash Flow SO Important?

“Never take your eyes off the cash flow because it’s the lifeblood of business.” 

What is cash flow? How can you use cash flow to benefit your personal life and your business? And what is a cash flow statement?

Cash flow is money that is constantly flowing and moving, out of and into your business each and every month. Sometimes it might seem as though your cash flow is only moving in one direction, out of your personal accounts and your business, but the truth is, it flows in many directions…

Yes, cash flow needs to go out of your business account each month, as it covers necessary expenses, like rent or even a loan or mortgage payment. However, cash flow is also coming into the business each time a payment is made from your loyal clients and customers who have purchased your products and services. 

When thinking about cash flow, what every business wants to achieve is “positive cash flow” which is when you have a greater amount of money coming into your account rather than having additional expenses and having more money have to go out.  

If you are a business owner or just beginning to start a business, understanding the importance of cash flow and how to use a cash flow statement is particularly essential for business success. 

You need to know what you can ask your accountant and how to be able to read your financial statements if you want to have successful business operations, and if you want to take your business to the next level. This will help you to grow and create financial freedom for yourself.

A cash flow statement summarizes the amount of cash coming in and out of your business account. It’s the amount of money of that flows and moves through the business account. The cash flow statement is a financial statement that will complement a balance sheet and the most common statements, a nonprofit and loss statement or the income statement.

It shows how much money came into the account and then, how much went out of the account. And it’s beneficial for you to know this as well as lenders, because if you would like to apply for a loan, most banks will ask to see a cash flow statement.

Interested in organizing and preparing a cash flow statement? ERPS Group is a one-of-a-kind financial firm located in Metro New York City that offers a differentiated approach to helping people to achieve enduring financial results. They offer effective strategies that help to bridge the gap between financial freedom and personal or business goals.