There are 4 main factors that directly affect your operational cash flow.
Because of these factors, you’re able to determine how liquid you are and the cash-on-hand you can use.
Get this information wrong, and you could be looking at an empty bank account, denied investing round, or worse… A letter and visit from the IRS.
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With more than 15 years of experience, I deliver spot-on, accurate reports weekly, monthly, quarterly, or whenever you’d like so you know exactly where your business stands.
This is where Local Accounting Services can help you a ton with your accounts payable system and processes.
As your Outsourced Accounting Department, I’m going to share the 4 direct factors that affect your cash flow inside of your business.
How Operational Cash Flow Is Affected
sales, inventory, accounts receivable, accounts payable, and non-cash expenses such as depreciation and amortization
#1. Sales
Sales is typically the biggest driver of cash flow for a business. A major part of any business gets its revenue from customers or clients. These customers need to be sold on the service/product, which make sales important as a cash flow creator in any business.
#2. Inventory
While storing inventory can be a safeguard against going out of stock, it shows up as negative cash flow on your cash flow statement until it’s sold. This is otherwise known as a cash outlay, which means the business has purchased more goods than it’s been able to sell. While inventory is always in flux, it’s important to make sure you’re not overstocking, because it can negatively affect cash flow when you need it most.
#3. Accounts Receivable
While positive, an increase in accounts receivable shows less cash “on hand” in the cash flow statement. This means that while you may be receiving payment from customer or clients, you’re not as liquid as you could be. Knowing the balance between receivables and cash is important. This determines who quickly or slowly you can move on financial opportunities form a cash standpoint.
#4. Accounts Payable
As you pay your accounts payables down, it will show as negative on your cash flow statement. Why? Because money is leaving the company to pay for bills or obligations. Vendors or suppliers need to get paid, but it shows negative in regards to cash flow. It’s important to understand where your accounts payable stands, daily, so you don’t run out of cash.
Knowing how your cash flow breaks out on a cash flow statement is important. It’s the difference between successful growth and catastrophic failure.
Don’t go another day without spot-on, accurate reports from your Outsourced Accounting Department.
How Do I Hire Virtual, Outsourced Bookkeeping & Local Accounting Services?
Hire me, your Local, Master Outsourced Bookkeeper & Expert Virtual Accountant, today.
I bring your books current the very first time. Bringing back months and years!
I deliver accurate, spot-on reports weekly, monthly, quarterly, or whenever you like without fail.
And, I help you forecast your financial future so you can know exactly where your business stands financially.
Don’t let behind books and inaccurate accounting get in the way of growing your business.
