“Cash Flow”, what is it?
Cash flow is a registration process, for internal purposes, which allows the business owner / manager to know the status of the cash (surplus or deficit) in its cash account at any given moment.
This registration is an intra-business procedure, and it must not be reported to the tax authorities.
If this “cash flow” tool is a tool for making decisions in the business, continuous and accurate registration must be strictly ensured while preparing it.
A tool to control the business:
An online tool for controlling the strength / weakness of the business at any point in time (present and/or future)
A tool for controlling the verification of the business planning
A tool for controlling the planned budget
It identifies periods of surplus or deficit in liquidity.
An auxiliary tool in the process of making decisions in the business
It guides the business owner to act out of financial strength.
It guides the business owner with respect to the amount and the timing for required credit.
There is a reasonable chance that a multi annual examination of the “Cash Flow” books will disclose a similar and permanent cyclicality over the year, where months of surplus in cash will be identified, and vice versa. This fact can help with the annual economic planning of the business.
Options for building the “tool” for managing the cash flow:
Manual / printed recording of revenues and expenses in an account book
Manual / printed recording of revenues and expenses in a calendric journal
Entering calendric revenues and expenses into the computer
Various computer programs for managing cash flow
Management in the XLS program which was designed for the management of cash flow
What is recommended and required while managing “cash flow”:
Management in the friendly XLS program which was planned for this task
Strictly ensuring the daily recording of all the financial transactions (including future transactions)
A frequent perusal and discussion of the status of the liquidity in the business and deriving from it the required conduct regarding every situation
The full amounts of the revenues and the expenses, including V.A.T., and including “deductible” and “non-deductible” expenses for tax purposes must be recorded, or, in sum – all that enters into and exits from the business.
Who can manage the “cash flow”?
A business owner, after a short and proper explanation
The finance manager of the business
The bookkeeper in the offices of the business
A secretary who did not receive prior training in bookkeeping and whom the business owner trusts
An effective tool in managing and controlling the business
A tool which is the “blood pressure gauge” of the business
On one hand, it does not require a lot of effort / investment and, on the other, it provides the most important advantages / results.