Cash Flow: Your Bottom Line—Really

I have to preface this with the facts. I started this blog prior to the COVID-19 shut down of our world as we know it. When researching and preparing the details of this newsletter, I knew the content was pertinent to a business owner. Little did I know, how vital it would be at the time of meeting the deadline to send to publishing. As I am reviewing this, a little more than two weeks will have passed before you are reading it. It is so important to stay on track, focus and get back to your foundation. Here is one way that can help you do that.

Your cash flow statement shows the flow of cash for your business during a set period of time. Cash flow consists of money received and money spent.

Using this in conjunction with your income statement and balance sheet, is a strategic way to verify that you've got enough to keep going, even when uncertainties occur.

For small businesses who run on tight margins, checking this regularly, at least monthly, is significant. Being up on these details, has helped many owners weather the times as we now know them to be. Stay proactive and informed. As an involved owner, you want to know if your everyday operations are generating enough money for you to basically stay in business. If you’re running low on cash, or just starting up, you might want to check it more frequently. This would be especially vital if for example, any major financial decisions are in the future, relocating, business loan, adding salaried positions, or other cash flow impacting actions. (Little did I know when I wrote that, what was to come.)

The best part about this statement is that it really does show your bottom line of the cash in hand. Meaning, it doesn’t include money that customers owe you but haven’t yet paid you. It also excludes money from loans that you receive. It’s an authentic picture of what you have on hand, your ‘net cash balance’.

Reviewing this report, will allow you to spot patterns that then help you predict potential downturns in your cash flow. Knowing these patterns will be extremely useful to help make those determinations for major financial purchases and decisions. You can also spot red flags, the most impactful being if the net income received is equal to or less than what you’re spending to operate your business. You can make some very successful decisions and take immediate action as needed, with this information at hand

But the most important thing about a cash flow statement is that, simply put, it lets you see your liquidity—if you have what you need to stay afloat.

The impact of this virus, will appear and be felt in ripples and waves over time. However, time forces us to continue to move forward, find growth, and to accept the ‘new normal’. When you get to that point, your cashflow will be one of your trusted resources, and you can’t imagine how you got along without utilizing it as much as you do now.

I do pray, there is some positive that comes out of this unsettling time in our life. While it may not be known today or tomorrow, we all need to focus on the good going on in the world, in your community, in your family and by you.  

“Look for the helpers. You will always find people who are helping”

—Mister Rogers