A staggering 99% of all businesses worldwide can be considered small businesses, and of these, the vast majority only have enough cash on hand to get through approximately one month of normal operations.

That makes cash flow a critical factor in all small businesses. Here’s what you need to know about cash flow.

Definition of cash flow

The simplest definition of cash flow is the revenues coming into your company, added to the expenses which are paid out. One of the reasons cash flow is so important, is because it’s one of the truest indicators of financial health, since it demonstrates how well a company is able to pay its expenses.

Where the cash goes

All income which is generated through sales, or assets that can be converted into cash, are considered to be inflows. Income which is used to pay for expenses, debts and investments are considered to be outflows. As long as recurring positive cash flows are greater than recurring negative cash flows, your business is probably in pretty fair shape, and is likely even to be turning a profit.

Cash flow statements

The cash flow statement for your business is one of the three primary financial statements used to measure the health of your business. On a cash flow statement, you will see information from the balance sheet and the profit and loss statement, as cash flow is analyzed by tracking day-to-day operations, financing activities, and capital investments. 

Included on the cash flow statement will be figures showing operational cash flow such as all business expenses, accounts receivable, accounts payable, current liabilities, and current assets. The investment cash flow will show figures associated with the purchase of long-term assets such as equipment. Cash flow from financing activities are amounts which are associated with loans or lines of credit. 

What is your company’s cash flow like? 

If you’ve been experiencing gaps in your company cash flow, you may need financing to get you past those shortfalls. Contact us at Fast Commercial Money to see if you qualify for financing which will improve your cash flow and provide relief for your budget.