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CASH FLOW
- The Pulse of Your Business
 Unfortunately, many small
business owners do not fully understand their cash flow
statement. This is shocking, given that all businesses
essentially run on cash, and cash flow is the lifeblood of
your business.
Some business experts even say
that a healthy cash flow is more important than your
business's ability to deliver its goods and services!
That's hard to swallow, but
consider this: if you fail to satisfy a customer and lose that
customer's business, you can always work harder to please the
next customer.
But if you fail to have enough
cash to pay your suppliers, creditors, or employees, you're
out of business!
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Cash Flow
Example: If your retail business bought a $1,000 item and
turned around to sell it for $2,000, then you have made a
$1,000 profit. But what if the buyer of the item is slow to
pay his or her bill, and six months pass before you collect on
the account?
Your retail
business may still show a profit, but what about the bills it
has to pay during that six-month period? You may not have the
cash to pay the bills despite the profits you earned on the
sale.
Furthermore,
this cash flow gap may cause you to miss other profit
opportunities, damage your credit rating, and force you to
take out loans and create debt. If this mistake is repeated
enough times, you may go bankrupt.
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The rest of the article talks
about What is Cash Flow, Cash Flow vs Profit
(see above box) and 5 Areas to Analyze Your Cash Flow.
For more cash flow information
click on the
rest of the article.
Or if you want to talk or ask me questions, call me, Paul Sullivan, at 240-316-3531.
As always you can call our offices if you have any
questions about these or any other accounting related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA |
