Turnover numbers are a great way to market your company to stakeholders and potential investors. Profit grounds you, and adds a dose of reality. But cash flow gives you a cold, hard look into how well your company is doing. Let’s get specific. Here’s a list of benefits of keeping close tabs on your cash flow statement.
![cash flow management](https://www.reliantfunding.com/wp-content/uploads/2019/10/understanding-cashflow.png)
Staying ahead of your debt
You apply for loans to finance expenses like buying equipment or property, upgrading infrastructure, or paying off other loans. When you apply for a loan, what you’re doing is using your future cash flow to meet a current need. Keeping track of negative cash flow—whether monthly or daily—removes the false sense of security that loans typically create, and paints a clearer picture.
Ensure Liquid Assets are Available
Your cash flow statement is a crucial aid that helps you keep short-term planning well managed. It helps you exercise control over liquid cash. Every business—whether a restaurant chain or a construction business-needs to have liquid assets on hand. You never know when a sudden necessity might strike. Unexpected weather conditions is an example of a reason to use liquid funds. A piece of equipment—that you bought cheaper, without a warranty—might break down years ahead of schedule. In both situations, you need cash on hand to get your business back on track.
For this reason, an essential component of short-term planning is making sure you always have a backup for contingencies.
Insights Into your Company’s Spend
Cash flow provides a precise look at your financial status. Some payments only impact your cash flow statement—not the profit and loss statement. A cash flow statement improves transparency into your finances and spending habits, keeping you informed on the actual state of play. Without a cash flow statement, you might be under the illusion that profit you make means a boost in finances.
Optimize your Cash Balance & Control over Working Capital
To learn these other important reasons to understand your cash flow and obtain tools to help with cash flow management, download our guide today!