Cash flow. It’s like the blood that flows through our veins. Our body cannot function without that blood pumping through our body, carrying oxygen to all our organs and keeping us alive!
In the same way, cash flow is the lifeblood of our business! But it’s true that most small business owners will struggle with cash flow at one point or another in their business.
In it’s simplest form, cash flow is essentially the cash or cash equivalents available for in and out financial transactions at any time. It is the liquid assets that flow in and out of the business and keep it running. A company can have a positive standing and great assets on it’s balance sheet and still go under if its cash flow position isn’t solid. (Think of it this way; any non-liquid assets (ie. company cars or computer equipment or even the building your company owns) simply won’t pay that electric bill or pay your staff!) Knowing your cash position is vital to managing
But as important as cash flow is, it’s equally important to acknowledge and understand that cash flow IS not profit.
Just because you have a good cash flow position at any given time doesn’t mean that you’re business is making a profit.
Knowing and understanding your financial position is so important to a healthy, thriving
Profit is the income you’ve generated AFTER your expenses. Again, not the same as cash flow. If you’re cash flow is good, but your profit is not, your business will not survive long without an infusion of cash, and that usually looks like some liability the company must take on to correct its cash flow position. (Think loan, credit card, line of credit, etc.)
If you have any questions about your business cash flow or profit position, contact our office today (352) 432-8104!
We are in business to keep YOU in business.
It’s what we love to do.
Let us help you understand your financial picture and get a good start on your financials today!
We’re here to help.