In order to form a successful business, it is necessary to learn how to effectively manage cash flows. For this purpose, many entrepreneurs use special software, one of which is Finoko.
Cash flow from investing activities should be effective. This requires a set of strategies to ensure it:
- regular monitoring of cash flows;
- based on the CF report, you can easily make a list of financial injection needs with a projection for the near future;
- creation of a small cash reserve intended for use in case of unplanned expenses;
- search for and negotiate mutually beneficial payment arrangements for suppliers and customers;
- implementation of constant monitoring, if necessary, optimization of cash receipts.
These methods have a positive effect on the financial stability of the enterprise for a long time.
Methods of reporting on cash flow
To compile a report on the movement of financial flows, specialists resort to two methods: direct and indirect. Let’s look at what they are:
- The direct method of reporting helps an entrepreneur to understand the true state of affairs, as it clearly indicates all sources of income and expenditure items. Profitable items include: income from the client audience, interest and dividends (if any). Expenditure items include: payroll, settlements with suppliers, repayment of loans (if any), etc.
- The indirect method involves working with the net cash profit received during the reporting period. It is editable, since the movement in working capital is taken into account, which occurs due to items of non-financial origin.
The indirect method is less detailed, but quite effective. It is more convenient for many entrepreneurs to submit a report on their activities using this method.