If Your Business Runs Out Of Cash, You Need a Cash Flow Report

Cash Flow Report

Does your business ever run out of cash? Do you worry about making payroll? Do you struggle to pay all your vendors? If so, a cash flow report is probably what you need to resolve these issues. Cash is the lifeblood of a business. Without it, you cannot pay employees or vendors and business operations stop. The purpose of a cash flow report is to make sure your company never runs out of cash. Every business should have a cash flow report, and it can be catastrophic to your business if you don’t.

A cash flow report simply tracks a company’s incoming and outgoing cash. This can be done on a weekly or monthly basis, and a business typically forecasts anywhere from 3 to 12 months out. The goal is to make sure money comes in as fast (or faster) than it goes out.

To create a cash flow report, you need to understand how long on average it takes your company to collect revenue. You also need to know your fixed costs, and be able to estimate your variable expenditures. A cash flow report subtracts upcoming expenses from income. This number needs to be greater than 0 at all times. If your company currently has $100k in your bank account, but in 6 months your balance is projected to be at -$20k, you have a problem that needs to be addressed. You could spend money more slowly, manage projects differently, or increase cash inflow.

One other tool you can utilize to resolve upcoming cash flow problems is with a business line of credit. I tell most clients that they should have a line of credit. It shouldn’t be treated as free money since it has to be paid back, but it can be used to bridge short-term gaps between income and expenses.

Sentinel Finance Group can resolve your cash flow issues in a way that works for your business. For example, we can plan out how quickly you pay your bills and which vendors you prioritize. You can raise prices, change pricing terms, or change your payroll cycle. There are plenty of tools to address cash flow issues, but someone needs to always be monitoring it.

Sentinel Finance Group is an outsourced CFO firm in Kansas City and provides fractional CFO services and controller services to local businesses.


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