![]() ![]() Proper cash flow management is vital for the long term growth of your business: Cash flow constraints can have far-reaching impacts on the growth of your venture.Over time, missing out on these opportunities will eventually result in significant losses for your venture. For example, while you may be able to land new contracts, you won’t be able to fulfil the agreement if you aren’t first able to meet your short term financial obligations, such as payroll or rental expenses. While this may happen occasionally, even profitable companies can run into trouble if having negative cash flow becomes a regular occurence. Cash flow is the lifeblood of any small business: As we’ve mentioned above, small businesses can find themselves in the situation where they are profitable, yet have negative cash flow.Why is cash flow management important for small business owners? You can be cash flow positive without being profitable, or be profitable but still be cash flow negative. It’s important to keep in mind that these are two distinct financial parameters - and it’s not uncommon for small businesses to be in the situation where cash flow and profits are at odds with one another. Among these metrics, associating cash flow with profitability is a common area of confusion, particularly for new business owners. There are core metrics that every small business owner should monitor, such as the operating margin, cash burn rate, cash flow and net profit. Don’t mistake profitability for cash flow This enables business owners to estimate how much cash they will have at any point in time, create cash inflow and outflow projections and assess when a positive or negative cash flow could occur. ![]() Cash flow management is thus the process of tracking and analysing how much money is coming into and going out of your business. Simply put, cash flow refers to money that is being transferred in and out of your business. ![]()
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