It is essential for a business owner to stay on top of cash movements in the business. We did talk about recording real time, but is that enough to keep track of cash flow?
The reality is a business has several cash inflows and outflows in a month, also beyond recording and keeping track there is a requirement to identify the outcome of those cashflows to be able to make important decisions.
The best way to do that? A cash flow statement which helps the business owner visualise the movement and the outcome.
What does a cash flow statement involve?
The word statement may sound like a lot of work. But the advantage of a statement is it can be customised for it to include only what a business owner would need to know:
· Revenue and other inflows
· Variable costs
· Contribution
· Fixed costs
· Profit
· Distribution of profit
It is also important to key in data month on month into the cash flow statement – this gives a sense of control and the ability to measure the profitability of the business month on month.
Why not hire an accountant?
Why should a business owner spend so much of their precious time on keying in numbers onto a cash flow statement while one could simply ask an accountant to provide a summary of monthly results?
There is no doubt businesses at some point need an accountant. But for a business owner – it is your money, your activities, your business and hence your responsibility. While the accountant takes care of the legal requirements and tax, a business owner needs to step up to be able to understand what is happening with the money. Because only you can make decisions for your business - not your accountant or anybody else.
When you go on to record real time, key in numbers into the cash flow statement and calculate the monthly result - You then go on to have a complete picture of how your business operates.
It is empowering to understand the major pillars of a business to build a strong foundation for sustainable growth – Money, Sales & marketing, Operations.
Keen to empower yourself with the skill to understand money? Book a free call with me.
Written by
Mrudula Muralidharan
Founder & Finance Coach
Million Goals
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