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The benefits of managing your firm’s cash flow

In the UK, and in many other countries, cash flow issues are top of the list of reasons why firms go out of business or go bankrupt. Sadly, in some cases these firms are actually profitable propositions. They just end up going out of business because there is not enough cash available to pay the bills and fulfil new orders.

There are many benefits to managing your cash flow and fortunately, it is not hard to do. Provided you keep accurate accounts and regularly analyse your profit/loss and cash flow reports, you can keep your business healthy and operating efficiently. Here are some of the benefits of monitoring cash flow in your business:

Your accounts are always up to date

The only way to produce meaningful cash flow and profit and loss reports is to use accounts data that is 100% up to date. If your firm’s latest bills have not been entered into your accounts system, any reports that you produce will not include those bills, so the reports will not accurately show you how much money you will have in the bank in two months’ time.

Regularly printing off cash flow reports forces you do to keep your accounts up to date. Doing this reduces the risk of important paperwork being lost and your filing an inaccurate tax return, something that you can be fined or prosecuted for.

See financial troubles coming

The key benefit to monitoring cash flow is that you can see financial trouble coming and take action to prevent disaster. If you see a period of time coming up where you will not have enough cash in your business you can arrange a short-term loan to take you through that period.

Makes it easier to secure finance

It is also possible to use cash flow reports to increase the chances of securing finance for your business. These reports will enable you to prove to a potential lender that your company will be able to pay the cash back on time, which will increase the likelihood that your loan application will be approved.

See into the future

With up to date accounts you can see the effect that things like changes in tax rates and exchange rates will have on your business. Cash flow reports also enable you to quickly and easily work out how big a pay rise you can afford to give to your staff.

There are many other benefits to managing your business cash flow, but these are the most important ones.

Posted by Louise
September 8, 2015
Finance

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