Financial Management

Cash flow management entails tracking of cash inflows and outflows using a cash flow statement. Cash flow statement is a simple schedule of sources of and uses of cash in a given period. It is a statement of a business’ bank account over a period.

When making business plans, it is important to prepare this statement to see in advance whether the business will generate adequate cash to meet its operations and accumulate a surplus.

Working capital is the money needed once the business has started operating to meet recurrent expenditures such as salaries, inventory, office supplies, marketing, selling, distribution, insurances and other monthly bills that have to be paid regularly.

The main components of working capital are current assets and current liabilities. Working Capital = Current Assets – Current Liabilities.

The cashbook is the gateway through which cash enters and leaves the business. It is advisable to have a bank account to be able to pay and to be paid using cheques and electronic methods. Another important use for a bank account is that it creates an independent track record of how the business is doing financially.

This record will be useful when seeking funds from a financier as a business with a bank account is viewed to be, credible, serious and organized.