The importance of cash flow

CTC Accounting
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Blog
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The importance of cash flow

Sybille Bouzaidi

COO and Finance Business Partner

6 October 2023

The importance of cash flow resides in the important aspects that can make or break the business. Cash flow determines the stability of a small business in the end. The cash flow of small businesses needs to be sufficient to cover everyday operations, handle unexpected expenses, fund growth opportunities, or adjust to other business irregularities. Without a sufficient buffer of cash, any of these factors could result in a cash flow gap.

That’s why you need to manage your cash flow with:

The cash flow’s importance appears when it’s managed with:

Cash flow statement

Cash Budget

Cash flow analysis

Why Keeping on Top of Your Cash Flow is So Important

– Decisions and Plans are better:

Knowing the exact amount of funds you have available anytime is possible with an accurate cash flow statement. You need to manage your cash flow carefully, so you can avoid bad decisions that put your business at risk.

– Always know where your money goes:

You need to manage, effectively, your cash flow, this way you will understand where you’re currently spending your money, something that’s not on a profit and loss statement. It’s vital for you to know where the money you spend is going and why.

– Protect your Business Relationships:

Are you having cash flow problems, and you don’t have the funds available to pay your suppliers. This is what can be harmful for your business relationship with them and damage your overall reputation.

– Expanding at the Right Time

It is exciting to Grow and expand your business. You can have new markets, new staff members and of course more revenue. But, keep in mind that you need to expand at the right time to avoid issues in the long-term.

It’s very clear that the importance of cash flow for companies of all sizes, is crucial, especially SMEs.