document.write('<p><b><font class="heading">Cash Flow -- The Pulse Of Your Business</font></b></p><p><font class="text">There are frig');
document.write('hteningly many small business owners out there who do not understand their cash flow statement. A shocking fact consider');
document.write('ing that all businesses essentially run on cash. And Cash flow is the life-blood of your business. Some business experts');
document.write(' go so far as to say a healthy cash flow is even more important than your business’s ability to deliver its goods and se');
document.write('rvices! You may find that perspective hard to swallow, but consider this – if you fail to satisfy a customer and lose th');
document.write('at customer’s business, you can always work harder to please the next customer. But if you fail to have enough cash to p');
document.write('ay your suppliers, creditors, or your employees, you’re out of business!</p><p>&nbsp;<br><b>What Is Cash Flow?</b></p>');
document.write('<p>Cash flow, simply defined, is the movement of money in and out of your business; these movements are called inflow ');
document.write('and outflow respectively. Inflows for your business primarily come from the sale of goods or services to your customers.');
document.write(' The inflow only occurs when you make a cash sale or collect on receivables, however. Remember, it is the cash that coun');
document.write('ts! Other examples of cash inflow are borrowed funds, income derived from sales of assets, and investment income from in');
document.write('terest.</p><p>Outflows for your business are generally the result of paying expenses. Examples of cash outflow are…pay');
document.write('ing employee wages, purchasing inventory or raw materials, purchasing fixed assets, operating costs, paying back loans, ');
document.write('and paying taxes. Your accountant is the best person to help you learn how your cash flow statement works. At your annua');
document.write('l review or audit, make sure your accountant explains where the numbers come from in your cash flow statement.</p><p><');
document.write('b>&nbsp;</b><b><br>Cash Flow Verses Profit</b></p><p>Profit and Cash flow are two entirely different concepts, each wi');
document.write('th entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a cert');
document.write('ain period of time, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.');
document.write('</p><p>Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business owner.');
document.write(' It is concerned with the movement of money in and out of a business. But more importantly, it is concerned with the tim');
document.write('es at which the movement of the money takes place.</p><p>Theoretically even profitable companies can go bankrupt. It w');
document.write('ould take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between');
document.write(' profit and cash flow relate to your business. For example, if your retail business bought a $1000 item and turned aroun');
document.write('d to sell it for $2000, then you have made a $1000 profit. But what if the buyer of the item is slow to pay his or her b');
document.write('ill, and six months pass before you collect on the account? Your retail business may still show a profit, but what about');
document.write(' the bills it has to pay during that six-month period? You may not have the cash to pay the bills despite the profits yo');
document.write('u earned on the sale. Furthermore this cash flow gap may cause you to miss other profit opportunities, damage your credi');
document.write('t rating, and force you to take out loans and create debt. If this mistake is repeated enough times you may even go bank');
document.write('rupt!</p><p><b>&nbsp;<br>Analyzing Your Cash Flow</b></p><p>The sooner you learn how to manage your cash flow, the b');
document.write('etter your chances for survival will be. Furthermore you will be able to protect your company’s short-term reputation as');
document.write(' well as position it for long-term success.</p><p>The first step towards taking control of, and properly managing your');
document.write(' company’s cash flow is to analyze the components that affect the timing of your cash inflows and outflows. A thorough a');
document.write('nalysis of these components will reveal problem areas that lead to cash flow gaps in your business. Narrowing, or even c');
document.write('losing, these gaps is the key to cash flow management.</p><p>Some of the more important components to examine are:</p>');
document.write('<p><b>Accounts Receivable.</b> Accounts receivable represent sales that have not yet been collected in the form of cas');
document.write('h. An account receivable is created when you sell something to a customer in return for his or her promise to pay at a l');
document.write('ater date. The longer it takes for your customers to pay on their accounts, the more negative affects there will be on y');
document.write('our cash flow.</p><p><b>Credit terms.</b> Credit terms are the time limits you set for your customers\' promise to pay ');
document.write('for the merchandise or services purchased from your business. Credit terms affect the timing of your cash inflows. One o');
document.write('f the simplest ways to improve cash flow is to get customers to pay their bills more quickly.</p><p><b>Credit policy.<');
document.write('/b> A credit policy is the blueprint you use when deciding to extend credit to a customer. The correct credit policy is ');
document.write('necessary to ensure that your cash flow doesn\'t fall victim to a credit policy that is too strict or to one that is too ');
document.write('generous.</p><p><b>Inventory.</b> Inventory describes the extra merchandise or supplies your business keeps on hand to');
document.write(' meet the demands of customers. An excessive amount of inventory hurts your cash flow by using up money that could be us');
document.write('ed for other cash outflows. Too many business owners buy inventory based on hopes and dreams instead of what they can re');
document.write('alistically sell. Keep your inventory as low as possible.</p><p><b>Accounts payable and cash flow.</b> Accounts payabl');
document.write('e are amounts you owe to your suppliers that are payable sometime within the near future, &quot;near&quot; meaning 30 to');
document.write(' 90 days. Without payables and trade credit you\'d have to pay for all goods and services at the time you purchase them. ');
document.write('For optimum cash flow management, you\'ll need to examine your payables schedule.</p><p>&nbsp;<br>Some cash flow gaps a');
document.write('re created intentionally. That is, a business will sometimes purposefully spend more cash to achieve some other financia');
document.write('l results. For example, a business may purchase extra inventory to take advantage of quantity discounts, accelerate cash');
document.write(' outflows to take advantage of significant trade discounts, or spend extra cash to expand its line of business.</p><p>');
document.write('For other businesses, cash flow gaps are unavoidable. Take, for example, a company that experiences seasonal fluctuation');
document.write('s in its line of business. This business may normally have cash flow gaps during its slow season and then later fill the');
document.write(' gaps with cash surpluses from the peak part of its season. Cash flow gaps are often filled by external financing source');
document.write('s. Revolving lines of credit, bank loans, and trade credit are just a few of the external financing options available th');
document.write('at you may want to discuss with your accountant.</p><p><b>&nbsp;<br>Managing Your Cash Flow</b></p><p>Now that you h');
document.write('ave considered how your business practices affect your cash flow, you are ready to develop some additional strategies fo');
document.write('r dealing with, narrowing, or closing cash flow gaps.</p><p><b>Contingency plans.</b> You should have a “life is beaut');
document.write('iful” plan a “life is life” plan and a “don’t even talk to me about life” plan. The first plan forecasts high sales, low');
document.write(' expenses and everything going better than expected. The second is based on realistically achievable sales and honest ex');
document.write('penses. The third plan specifies how to survive if everything goes wrong. The flag for going from the realistic plan to ');
document.write('the survival plan is a sudden or steady decline in sales.</p><p><b>Cash Forecasting.</b> The biggest problem for busin');
document.write('ess start-ups is the owner failing to plan for how much cash the business needs throughout the year. This applies especi');
document.write('ally to businesses where payments usually come in over several months or after the work is complete. Business owners mus');
document.write('t also forecast expenses that aren’t due each month, such as annual insurance premiums.</p><p><b>Spending Controls. </');
document.write('b>Keep an eye on all spending; try to keep enough money in the company to get through tough times. New business owners a');
document.write('re often tempted to spend too much for nonessentials. Make sure you carefully negotiate leases and solicit price quotes ');
document.write('from several vendors to find the best value. Also, stop selling products that are losing money and avoid buying assets t');
document.write('hat require substantial cash outlays.</p><p><b>Accumulate Salary. </b>If necessary to maintain a positive cash flow, y');
document.write('ou may need to forfeit part of your own salary. Many entrepreneurs go bankrupt because they don’t pay attention to the f');
document.write('inancial state of their business and insist on paying themselves big salaries no matter what.</p><p><b>Add Employees c');
document.write('autiously.</b> Delay hiring workers as long as possible. Instead, look for ways to maximize your own productivity and th');
document.write('at of any existing employees. Also consider lower-cost alternatives, such as outsourcing work to independent contractors');
document.write('.</p><p><b>&nbsp;<br>What To Do With A Cash Surplus</b></p><p>Managing and improving your cash flow should result in');
document.write(' a cash surplus for your business. How you handle your cash surplus is just as important as the management of money into');
document.write(' and out of your cash flow cycle.</p><p>Paying down any debt you have is generally the first option you should conside');
document.write('r when deciding what to do with your cash surplus, because a short-term investment is not likely to yield a return equal');
document.write(' to or greater than the rate of interest on any of your debt. However, the decision to automatically pay down debt may n');
document.write('ot be correct in all cases. Your accountant is the best person to help you make these decisions.</p><p>Monitoring and ');
document.write('managing your cash flow is an important task to perform in order to ensure the vitality of your business. The first sign');
document.write('s of financial woe will appear in your cash flow statement, giving you time to recognize a forthcoming problem and plan ');
document.write('a strategy to deal with it. Furthermore, with periodic cash flow analysis, you can head off those unpleasant financial g');
document.write('litches by recognizing which aspects of your business have the potential to cause cash flow gaps. With cash flow managem');
document.write('ent and analysis, you will be able to plan on how you’re going to direct your cash surplus with assurance that you will ');
document.write('have adequate funds to cover day-to-day expenses.</p>');