Cash flow

Cash flow is an incredibly important metric in measuring the financial health of both businesses and individuals. It is a measure of the movement of money over a specified period, usually calculated as net income or profit, and can refer to both the total amount that enters and exits a business as well as the timing and pattern of those cash flows.

Good cash flow management allows businesses to remain financial secure and helps individuals plan for the future.

A Scenario : Understanding Cash-flow

Jane is a business-minded individual who recently began her own jewelry venture. Amidst the struggles of managing cash flow, her sales have seen a steady growth over the few months she has been running it.

Jane is currently facing a financial issue due to increasing expenses for materials, website hosting fees, and shipping costs as she works to grow her business by investing in marketing and advertising. However, her income isn’t enough to cover all of her expenses.

Jane’s lack of cash flow management has been causing her to dip into her personal savings in order to keep the business afloat. She understands that if she wants her business to succeed, she needs to make changes and find a way to better manage her cash flow.

Jane takes the proactive step of constructing a cash flow forecast to get an idea of how much money she’ll need in the future. She also makes, and follows, a budget while trimming any unnecessary expenses.

By taking these steps, Jane has been able to keep her business running at optimum level. This allows her to invest more in business growth, resulting in greater sales and higher revenue.