Running
a business can either be a wonderful or terrible experience (maybe
even both), although businesspeople with poor financial sense tend to
have the latter. After all, it can be a bit overwhelming to manage a
company's funds, even more so without a proper cash flow management
system. Money matters can even get confusing especially for those who
zero knowledge of basic financial management principles.
Cash
inflows and outflows
comprise the money that comes in and out of the company
(respectively), with the difference determining the company's net
cash flow. If this value turns out
positive, then that means that the company has the money to pay its
bills and operational expenses. However, having too much money
sitting idly can also be a bad thing since a company doesn't earn any
income from it. Such funds are usually sold as liquid
assets, or
assets that can easily be converted to cash, so that a company
doesn't have to, say, pay for storage costs.
These
are just some of the things that a cash flow management system
considers carefully. Cash flow management determines the right amount
of cash inflow that a company should meet in order to strike a
balance between income and expenditures, without generating too much
“idle money” in the process.
