How to Develop a Cash Flow Analysis for Your Business

Many small business owners are proficient in their given line of business – expertly handling services or products for their customers or clients.  What they often struggle with is managing their books and cash flow.  As the Small Business Administration explains, if cash flow is not managed effectively, it “…can affect the everyday operations of your business and your eligibility to receive a loan.”

Cash flow comprises the inflow of monies that can come from sales, loans, credit and more; as well as the outflow which is any expenditure or outgoing payments such as purchases, loan payments, and payment of vendor bills or invoices.  Monitoring cash flow will also help in tracking profit and loss margins that can outline not just cash in and out – but financing and investments.

It’s easy to ignore these financial aspects when the business is successful — as many small business owners spend most of their time working in the business rather than on their business.  That said, not closely watching financials in the end will mean crash courses in QuickBooks and possible late nights with an accountant at tax time.  Most importantly, it could mean missed opportunities for investing in new equipment or office space, for instance, that can help take your business to the next level.

Understanding your business takes a bit of preparation, but there are many software programs available today to help you manage cash flow – as well as help you organize and plan for the future.

The SBA reminds businesses that tracing theses costs as these reports will also help a business respond to peaks and valleys and any potential issues that may come about – as part of any business cycle.  A cash flow profit and loss reports will help outline the following:

• Operating activities monitor all business costs and income from non-cash items.
• Investment Activities: Investment in long term or capital purchases like a large piece of equipment or real estate is taken into account along with in-flow and outflow.
• Financing activities: This looks at any monies related to funding your business such as the amount of a loan would be considered.  Any venture capital funding or investment figures could be part of the financing as well.

If you are looking for working capital funding and wondering whether your current cash flow can qualify your company for a small business loan, National Business Helpers can help you understand the various programs that may be available, from a Secured Loan with Monthly Payments, a True Business Line of Credit or 30 Day Deferred Payment Programs among other options.