 |
| | | |
|
Project Management Best Practice Article
| What is Cash Flow? |
| By: John Mussi |
Ever wondered what is cash flow? Understanding the basic concepts of cash flow will help you plan for the unforeseen eventualities that nearly every business faces. Although poor management is normally given as the main cause for business failure, poor cash management is running a close second as a common stumbling block.
Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These can potentially be converted to cash, but can't be used to pay suppliers, rent, or employees. Profit growth does not necessarily mean more cash on hand. Profit is the amount of money you expect to make over a given period of time. Cash is what you must have on hand to keep your business running.
Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those cheques you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.
There are two types of cash flow, positive and negative. Positive cash flow means, if its cash inflow exceeds the outflow, a company has a positive cash flow.
Conversely, negative cash flow means, if its cash outflow exceeds the inflow, a company has a negative cash flow. Reasons for negative cash flow include too much or obsolete inventory and poor collections on accounts receivable.
Cash flow can be broken down into three sections:
Operating cash flow: often referred to as working capital, is the cash flow generated from internal operations. It comes from sales of the product or service of your business, and because it is generated internally, it is under your control.
Investing cash flow: is generated internally from non-operating activities. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.
Financing cash flow: is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock, and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.
Good cash management is simple. It involves:
Knowing when, where, and how your cash needs will occur
Knowing the best sources for meeting additional cash needs
Being prepared to meet these needs when they occur, by keeping good relationships with bankers and other creditors
The starting point for good cash flow management is developing a cash flow projection to help them develop the necessary capital strategy to meet their business needs.
You may freely reprint this article provided the author's biography remains intact:
About the Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.
|
|
| Keywords: negative cash, although poor management, poor cash management, management, cash, management is normally, cash flow, projection, cash management, project management |
Project Management News
Helpful Project Management Best Practice Links
A COMMUNITY OF PRACTICE FOR PROJECT MANAGEMENT BEST PRACTICES
... A COMMUNITY OF PRACTICE FOR. PROJECT MANAGEMENT BEST PRACTICES ... a CoP, the development and stewardship of project management best practices. ...
Best Practice Project Management
Best practice project management - start with the basics, define your project well, and apply to ANY and allof your activities. ... Best Practice Project Management. Jump to any page on this site ... See About Privacy. Best Practice Project Management Starts With the Basics ...
Software Project Management Best Practice
Contact Us Campus Map Library Directory ... practice sessions. Small group discussions also let participants share some of their project management-related problems and to identify which of the best ...
best practice project management
... best practice project management. Offers best practice project management with a product or service that ... or company online. Offers best practice project management with a product or ...
Tri-Service Software Program Managers Network
SPMN Mission: To identify proven industry and government software best practices and convey them to managers of large-scale software-intensive acquisition programs. ... program managers to achieve project success and deliver quality systems ... Quick Links. Project Management. Systems ...
CBP Project Management Best Practices
In project management, success requires knowledge and wisdom. Increase yours by turning to. Project Management. Best Practices Report. for concise, practical insights from the leaders in our field. ... Project Management Best Practices Report brings you the knowledge of thought leaders and senior ... How best practice organizations structure their project offices, from Frank Toney and ...
Benchmarking - Project Management Benchmarking Network
FREE Membership. & FREE Newsletter. Key Study Areas. Upcoming Roundtables ... benchmarking studies of important Project Management processes. ... enablers of "best in class" Project Management processes can be ... data and related best practices in Project Management. ...
Best Practice IT Project Management : White Paper
... Best Practice IT Project Management. A Long Adventurous Journey ... Abstract: This paper examines best practice information technology (IT) project management in terms of the five phases ...
Find in a Library: Franchising best practice in elder abuse program management : final project program.
... • Title: Franchising best practice in elder abuse program management : final project program. •. Publisher ...
Best Practices Database in Improving the Living Environment
Best Practices Database in Improving the Living Environment Best Practices Database in Improving the Living Environment This is a searchable database of solutions from a United Nation's program that highlights outstanding urban initiatives ...
|
|
