Article by Robert Green, Business Advisor, Western Sydney Business Centre

Cash Flow

Over the years there have been lots of songs written about money, the lack of, too much etc. Some say that it is a liquid asset that flows faster and dries up quicker than water itself. Money, or cash, is the lifeblood of small business and like water it should be conserved and managed so that the business survives. It is a fact that a business’s cash flow is the most important thing a business owner needs to attend to and without proper attention the business will fail.

It is a common mistake that a budget and a cash flow statement are the same, but a budget is a forecast /plan of the bulk amounts on income and expense by category.  A business will create a budget that looks at its major items of income and expense to produce a profit figure.

The cash flow, however, breaks these items down to smaller chunks (monthly at least), lists them by period and looks at the net result.  Where a budget is usually the macro net result, a cash flow is the microplan of CASH coming and going each period through the business’s bank accounts based on past experience and current plans. The cash flow is will tell the owner where there are going to be cash surpluses and cash deficits so that the surpluses can be set aside to cover the deficits.

The cash flow can show you where there is a chance there wont be surpluses to cover the expenses. It will then influence your sales and marketing (or other income generating processes) strategies to ensure this does not happen.

Producing your cash flow plan for the first time can be quite daunting, but you can do it with the help of the Small Business advisors at Western Sydney Business Centre.