 |
| | | |
|
Project Management Institute 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 Institute Links
Austin Chapter - Project Management Institute
Your description here... products to business, government and the project management community in order to advance the ... 1/2 given by the Project Management Institute. Registration: For registration and ...
Project Management Institute - Atlanta, Georgia
Project Management Institute. Atlanta Chapter. Join the PMI Atlanta email list. Building professionalism in project management ®. Check out some of the latest updates on our site: ... PMP VERIFICATION - This registry allows verification of PMI's Project Management Professionals (PMPs). ...
NCPMI -- New Home Page
The North Carolina Chapter of the Project Management Institute (NCPMI) located in Raleigh, North Carolina. Building professionalism in Project Management. ... other nations; and "Project Management Journal" and "Building professionalism in project management." are trademarks of the Project Management Institute, Inc. ...
Puget Sound Chapter of PMI - Home
Puget Sound Chapter of the Project Management Institute, serving the Western Washington area. ... to http://www.pmi.org for the Project Management Institute of which we are one of the largest ... more to add to your project management portfolio! For more information and ...
Project management training, templates and techniques
Project management resource site with hundreds of free articles, tools and templates plus E-learning certifications for all level of project management experience. ... Risk management ... Project®. The Project Management Institute, Inc. owns the following registered trade and certification marks: PMI® PMBOK® PMP® and CAPM_. The CompTIA IT Project ...
PMI Maine Home
... The Project Management Institute (PMI) is an international association with 110,000+ members in ... goal is to support the project management profession by providing education, research ...
Minnesota Chapter of the Project Management Institute - Professional Organization for PMs
... Minnesota Chapter of the Project Management Institute. Building Professionalism in Project Management ... organization known as the Project Management Institute (PMI®). No where is this ...
Certification Project Management Professional Overview
Project Management Professional (PMP®) Examination. Who would have thought in our formative years that we would come this far? ... Today, there are worldwide over 110,000 Project Management Professionals (PMPs) who provide services in 120 ... ©2005 Project Management Institute, Inc. Linking to PMI | Privacy Policy ...
Project Management Institute (PMI) - The largest project management association
... Project Management Institute... Making project management indispensable for business results. ... initiative. The Project Management Institute (PMI®) is project management's leading ...
Project Management Institute Northern Utah Chapter
... advancement of project management and all project management professionals in ... the profession of project management ... administers the Project Management Professional (PMP) certification ...
|
|
