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How much cash does your business generate?

By Russel Aizen, MRA Solutions

Do you prepare daily, weekly, monthly cash flow forecasts and statements? Have you considered the cash flow impacts of not just income and expenditure cash flows but also capital expenditure, loan repayments …?

There is a big difference between the bottom line of your profit and loss account and your cash flow. It is important to understand the key drivers behind cash flow and the difference between the two. The bottom line on the profit and loss is important but cash flow is even more important. Many clients say to me “Why? My profit and loss shows a profit but I never have any cash?

In today’s current economic environment even governments now have to apply austerity measures to try and balance their books. They can’t just keep raising their debt levels and continually run their economies with huge deficits and keep spending what they don’t have. It all comes down to one thing only and that is cash flow.

Business owners do not have the luxury of being able to run their businesses with growing deficits so the key focus becomes cash flow and the bottom line on the profit and loss.

The cash flow statement and cash flow forecasts from business operations tell the whole story. Starting with revenue and ending with the amount of cash that your business generates from revenue generating activities. That is your Cash surplus or deficit in running and managing business operations, not profit. Plus, it does not count the cash you borrowed from your bank, or that you got from your investors. Just plain and simple cash flow measurements and outlooks, how much cash does your business generate.

Too often cash gets tied up in accounts receivable, or in inventory. Cash Flow from Operations shows you that. On occasion, when we catch up payables, we use cash. Cash Flow from Operations shows you that. Sometimes, overhead is too high or margins too low. Cash Flow from Operations shows you that.

MRA Solutions assists and helps and makes sure our clients and business owners know that “Cash is King”.

The cash flow statement and cash flow budgets and forecasts are one of the many key measurements in any business.

Do you understand your cash flow? Do you have cash flow budgets and forecasts? Don’t make the same mistake governments worldwide are doing. Businesses don’t have the same luxury of being able to raise capital and finance deficits.

MRA Solutions assists all clients in developing cash flow models and understanding all cash flow impacts on their business operations.