Cash Flow Management: Some of its Most Basic Principles and Solutions

For fairly experienced and rookie entrepreneurs alike, effective cash flow management is often mistaken for effective profit management when, in fact, they are two different concepts. Cash flow management is a tool to help an entrepreneur manage the flow of income and balance it against the expenses for his business to stay viable. Profit management, on the other hand, involves making decisions to manage and maximize profits. Chicago-based businessman Jay Goltz, writing for the New York Times, outlines some of the lessons he has learned in the field while offering some valuable tips to stay liquid.

A true cash flow problem, according to Goltz, occurs when a company makes money, but subsequently sees its cash disappear, leaving no margin for profit. Usually, this money is spent on debt-settling, investing in works-in-progress, and the purchase of inventory and new equipment.

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How to Manage Your Business Finances

While some business owners claim to have put up their companies to fulfill a dream, the vast majority would say they did it to make more profit. If you have just put up your own business, profit or cash inflow is exactly what you have to concentrate on to keep your business up and running. Your finances should be systematically monitored to smooth out any risk of collapse or insolvency.