Cash Flow Management

CASH FLOW CYCLE

Cash flow is referred to be the single most serious concern of the SME (small and medium-sized enterprise). It is simply the inflow and outflow movement of money in the business. The effect of cash flow is real and needs to be protected.

There are four principles in cash management:

- The first is cash needs to be tracked and captured. It needs to be in a controlled process.

- Second, cash management is an important part of the business cycle.

- Third, you need information on outstanding receipts, investment options, longer term projection, etc.

- And the fourth is... be masterful.

THE CASH FLOW CYCLE

It can be said that cash flow is a cycle. Company or SME use cash to acquire resources such as land, buildings, equipment, etc. and to buy goods and services which are then sold to customers. Then you collect and deposit the funds and then cycles back again. It is important to see the timing of the inflow and outflow of cash to have success of the business.

What are inflows?

This is the movement of money into the business, such as receipt of monies from the sale of goods and services, proceeds from the bank, interest received on investments, etc.

What are outflows?

These refer to the movement of cash out of the company/business, such as purchasing finished goods for re-sale, purchasing fixed assets, etc.

CASHFLOW MANAGEMENT is vital to the health of the business. Ideally, more money should return to the business against the outflow. Without careful monitoring of the cash flow, the business may not have the profit realization as they scheduled