Cash flow management / Cash flow Projection


Profits Plus’s cash flow management accounting service focuses on predicting company’s future financial position. It has core value in financial management planning of a company. Managing cash flow ensures that a company or business is generating enough cash to fulfil all it’s necessary obligations. Following are the advantages of setting up cash flow management:

  • Covenant forecasting and half/ full year reporting visibility
  • Interest and debt reduction.
  • Short term liquidity planning.
  • Long Term Planning/ Budgeting Purposes

The best strategy for enhancement of any business is setting up cash flow management. Cash flow basically is the amount of cash or noncash that travels into and out of your business or company. Cash flow management tools & techniques help you make sure that your company is earning more money than it is spending, if it goes vice versa the business or company will have to face negative consequences.

Following steps are meant to be followed for setting up cash flow management:

  • Calculating the cash flow by noting the cash available at the beginning and end of any specific period.
  • Cash flow analysis needs to be performed on daily basis, so you can timely sort out your cashflow issues.
  • To maintain sufficient cash flow for the business, you need to develop applicable strategies.
  • Forecasting revenue is important for a growing business.
  • Forecasting expenses involves enlisting fixed or recurring transactions that need to be made.
  • Consider your payables.
  • Creating a suitable strategy is the final step. Reconsider all the above steps to make sure that the strategy developed is helpful for the growth of your business. Profits plus’s expert accountants are always available at your service for assistance.


What are the 3 types of cash flow?

  1. Operating cash flows (CFO)
  2. Cash flows from investments
  3. Cash flows from financing

Why is cash flow management important?

Every business must keep its assets balanced to avoid financial crises. Cash flow management helps you keep a close eye on the amount of money being generated and spent, letting you forecast the revenue. With effective management, the company will be able to reserve sufficient funds to meet future expenses as well as to pay existing investors.

It focuses on how a company’s financing activities are managed and if adequate cash flow has been grossed.

How to manage cash flows? What are the fundamental steps of cash flow management?

  • Decide your credit control procedures that must be achievable, practical, and result-driven.
  • Forecast your realistic sales to get an estimate of revenue that can be generated in future.
  • Develop healthy relations with suppliers by paying them timely.
  • Implement strict controls over inventory management for efficient stock control.
  • Stop unnecessary, surplus spending to keep your business financial cycles running. Make efficiency savings.
  • Review financial records, cash flow, and balance sheets to evaluate the progress, highlight potential future cash flow problems, and determine underperforming factors.
  • Don’t assume to achieve unrealistic profits. Always appraise the financial situation honestly.

How do you explain the cash flow formula?

  1. Free Cash Flow

Net income + Depreciation/Amortization – Change in Working Capital – Capital Expenditure

  1. Operating Cash Flow

Operating Income + Depreciation – Taxes + Change in Working Capital

  1. Cash Flow Forecast 

Beginning Cash + Projected Inflows – Projected Outflows = Ending Cash.

How to manage personal cash flows? What are the most common ways to improve cash flow?

  • Set strict payment terms defining specific timeframes and penalties
  • Add the aspect of giving incentives to the customers
  • Reduce unnecessary expenses
  • Check customer’s credit
  • Automate billing, payroll, and payment procedures
  • Go for leasing rather than purchasing
  • Improve inventory management
  • Analyze cash flow patterns to have an accurate forecast
  • Implement electronically-generated invoice factor and accept only e-payment receipts

Can cash flow go negative?

Yes, it can happen in a situation where your expenses are more than you are earning. Cash flow is negative if your outgoing is more than incoming (cash).

How do you define a ‘good cash flow’?

Simply defined in the ratio: If you have a ratio greater than 1, it depicts a “good cash flow,” whereas a ratio lesser than 1 might suggest bad financial health (inadequate resources to meet short- and long-term expenses).