Lack of money is the main cause of small businesses out of business or bankruptcy. Many startup companies are unsuccessful because of their inadequate cash reserves. Hence, neat cash flow or cash flow is a necessity for the company to stay alive. Incremental Cash Flow is the flow of money flowing in and out of a company for a certain period of time, generally every month. Own cash flow consists of incoming cash flow and outgoing cash flow. Cash inflow of cash inflow is cash or money that goes into the company and becomes an income that will add to the company’s assets. Cash inflow can come from the sale of products or services to consumers or clients, bank loans, interest earned from investments, additional capital from investors, or accounts receivable that have been liquidated.
The health of Cash Flow
Cash outflow or cash outflow is cash issued by the company, aiming to support various operational activities of the company. The form of cash outflow is generally in the form of corporate spending, funds to pay workers’ salaries, taxes, installment payments, and so on. The general indication of healthy cash flow is the existence of surplus between real cash receipts and expenditures, and cash or money is ready to be used for any company activity. Whereas neat cash flow is indicated by the clear priority of the company’s expenditure, balanced control between the needs and desires of the company, and consideration of the use of good payment instruments.
You can know and calculate well the bottleneck of funds. With neat cash flow management, it will make it easier for the company managed to find out at what point the company has a bottleneck, taking into account then implementing a solution to launch the company’s funding bottleneck. The foundation of decision making or company policy can be obtained from a neat cash flow company. Taking company decisions and policies are closely related to the prediction of cash flow in the future along with future planning. With the existence of neat cash flow management, it can be predicted future cash flows and plan allocations for the future.
Human Resources Is Related
When cash flow is predicted to decline, companies can implement efficiency or apply to sell out so that sales can be effective so they can restore cash flow to health. And when the cash flow is predicted to rise, companies can make the right investments to the channel, improve the quality of human resources, conduct research or even innovate products or services. Improving the quality of human resources is also good for competence, credibility, and capability of workers and the company itself. Neat cash flow management can also analyze the company’s capability in paying and carrying out the company’s obligations. When the company is in need of an injection of funds, neat cash flow and its analysis can determine whether the company is able not only to apply for a loan but also to repay the loan in full later.