Cash Flow Statement Business Plan

“Never take your eyes off the cash flow,” says Richard Branson, founder of the Virgin Group, “because it’s the lifeblood of your business.” Whether your business is struggling or booming, managing cash flow effectively is important for survival — statistics show us that over 60 percent of businesses that go bust are profitable but have simply run out of cash.

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Many businesses fail because they run out of cash leaked through losses or poor management processes.

Some small-business owners struggle with the concept that cash is not the same thing as revenue. It only actually gets cash when it collects payments from the customer.

However, you can learn whether or not your company is cash flow positive or negative by comparing the beginning and end-of-month balances.

If the end-of-the-month cash balance is higher, the company may be cash flow positive.

often means simply paying an insurance premium in installments rather than all at once.

For example, car insurance premiums are often assessed once every six months.If a company can get paid in advance or with a credit card, they may be able to boost cash flow.The sooner a customer pays, the higher the cash flow.You may want to learn what makes up a monthly cash flow statement, which can easily be printed from any accounting application.For your cash flow plan, remember that cash flow is typically monthly accrual profit, plus the change in accounts payable, the change in accounts receivable and the change in inventory.You may want to consider not having your Days Sales Outstanding (DSO) be more than 133 percent of the invoice terms. You may not want to extend credit to a customer that has not proven they can pay in a timely fashion.Getting extended credit terms from vendors may help boost cash since the company is paying their bills later and retaining money.One way to achieve this is by paying within the agreed period of time.After six to twelve months of remitting invoices on time, you may want to ask for longer terms.Buying inventory that sits for months on the shelf waiting for customer orders may take a lot of cash out of your business. Subtle changes in each of these metrics may help save or consume a lot of cash.Having a cash flow plan and following the steps that are listed above may help improve your company's cash flow position.


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