Business Cash Flow – Is Your Business Healthy?

Business Cash Flow – Is Your Business Healthy?

…Mey here on a calm Tuesday evening, enjoying time with my family and my brother who is visiting us from Japan, blogging about Business Cash Flow – Is Your Business Healthy?

 

 

…I was in a training this afternoon at my Bank and it was all on Business Cash Flow…

…it was really interesting to see how businesses handle their accounting, and how to interpret their financial statements and tax returns…

What Makes Healthy Cash Flow?

…and what makes a business healthy…

…like blood circulating through a body, the sign of a businesses health is the cash flow…

…our instructor said that Cash Is King, and cash is what a business will use to pay back their loan…

…so in order to figure out the cash flow, we had to take the Net Income and then add in things that are taken out for tax purposes (amortization, depreciation…) to get a company’s true cash flow…

…also need to subtract out various expenses…

…so how do you know if a company is healthy?

…how do you know if your company is healthy?

…well, in order to be healthy, you need to make plenty of cash through their operations every year on a consistent basis…

…and it should be growing…

…and this means you are making more than you are spending…

…money should be coming from selling products and services, not from loans from shareholders or company owners alone…

Common Cash Flow Weaknesses of Businesses

  • …some of the biggest issues I’ve seen is businesses start growing and then also start spending more than they are growing……it’s like the sudden growth spurs them on a spending spree……and their cash flow suffers and debt increases…
  • …some businesses are not good at collecting the money owed to them, either due to poor management or due to lack of due diligence in collecting on their bills…
  • ….some businesses are late paying their bills, causing excessive fees and losing out on the discounts they could get if they paid their vendors in advance…

 

How about you?

Does your business have a healthy cash flow?

Is there anything you know that contributes to a healthy business cash flow? 

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12 Replies to “Business Cash Flow – Is Your Business Healthy?”

  1. People overlook how important it is for their business to continuously look at their cashflow. No cashflow, no growth, no existence.

    1. Yes Sharon, I think a lot of businesses start making money and then lose sight of their cashflow…

  2. Great post Mey on the importance of business cash flow in order to succeed. Very true that many businesses fail due to spending too much and not producing or selling enough to cover expenses. Thank you for sharing this lesson.

    1. Thanks Brian and Felicia for the comment! Yes, business cash flow is so important for success!

  4. Agree on what you said, Meylysa. Some business tend to spend more when they are making more. It’s important to look at our cashflow and study how it affects our spending. Thanks for sharing this!

    1. Thanks Rhonda! I’m honored by your visit to my blog unstoppable Mama! Yes, cashflow is so important, and I and I’m sure many others learned the hard way by making these very mistakes first!

  6. Thanks for sharing Meylysa and yes cash is king and definitely the life blood of any business, including home based businesses. Just like us for our bodies we need blood to help keep us alive and a business new money to help keep it alive.

    1. Hi Dan, cash is king and yes, the life blood of all businesses! Thanks so much for reading and commenting!