4 Reasons A Cash Flow Statement Is Important

I’m always happy to pass on great info...and this is great info! I’ve included a few snippets below lifted from the full article. 

Without cash your business won’t run, your employees become cranky and suppliers stop shipping you, and believe it or not you can run out of cash while your business is very profitable.

A cash flow statement tells you where the money went.  A profit and loss statement says nothing about principal payments you make to the bank. You could have reasonably good profits, but the amount of money you pay your bank every month could be putting you out of business.

Cash flow statements tell you where you spent your money. If you increased inventory you used cash. If you extended more credit to customers you used cash. If you bought lots of capital equipment you used cash. All three of these issues won’t show up on your profit and loss statement.

A cash flow statement can help you focus on creating excess cash.  Having profits is important. Profits are one of the things that help create cash. There are other things that can also help you create cash.

If you can pay less for capital equipment you need you are creating cash while spending money. If you can collect receivables from your customers faster you are creating cash. If you use inventory more efficiently you create cash. Concentrating only on your profit and loss statement makes it difficult to focus on cash.

Do you need more details on this subject? Head on over to the full article here for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts [email protected]; or call me on (0410) 659-835.

Thanks,

Sumith