Managing Cash Flow Management ( Cfm )

1450 WordsApr 21, 20166 Pages
Managing Cash Flow Cash Flow is composed of revenue or expense streams that change cash accounts over a specified period. The "statement of cash flows" showing the amount of cash generated and used by a company during the period is calculated by adding noncash charges (such as depreciation) to net income after taxes. Changes in cash are usually derived from one of three activities - financing, operations or investing. Sales growth can conceal many problems. When managing a growing company, watch expenses carefully. If you see expenses growing faster than sales, examine costs carefully to find places to cut or control them. The lag between the time you have to pay your suppliers and employees and the time you collect from your customers can be a problem. The solution is cash flow management (CFM). CFM means delaying disbursements of cash as long as possible while requiring anyone who owes you money to pay it quickly. Rules (FASB) that govern the creation of financial statements are not about tracking the actual flow of cash through your business. They are focused on measuring profit or loss. Income does not tell you what happened to your cash balance during the period. It merely defines net income based on the accounting rules used to create the income statement. Only one component of understanding and managing your cash flow. Managing Cash Flow Use “What-ifs” to Estimate Cash-Flow You may not have tried this yet, but creating “what if” scenarios based on swings in revenues,

More about Managing Cash Flow Management ( Cfm )

Open Document