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How to make a cash flow correctly?10 min read

How to make a cash flow correctly?10 min read

Reading Time: 4 minutes

Cash flow is the tool responsible for keeping your business finances organized. That’s why it’s important to control it daily and keep it updated. Otherwise, your company’s financial health could collapse.

To prevent the health of your business from being compromised and a financial crisis from setting in, let’s check, in this article, what a cash flow is and how to do it correctly.

So open up your notebook and write down whatever seems important to you, as well as the process for structuring it efficiently. Good reading!


What is a cash flow

It is a tool that makes it possible to monitor the financial movements of the company. Based on this assumption, we can say that it is how it is possible to maintain the financial health of a business.

After all, cash flow is an important indicator of corporate finance, as it is composed of the enterprise’s revenues and expenses, accurately indicating the financial outlook within a given period.

It serves for the manager to be able to control the next steps of the corporation, since it is through its analysis that a company decides, for example, between reorganizing the financial planning or investing in resources for the expansion of the business.


Step by step to build a cash flow

So, knowing the importance of this tool, which is also an indicator for making strategic decisions, check out the step-by-step guide to setting up a cash flow correctly:

1. Check the company’s opening balance

The first step will be the most challenging because if your finances are disorganized, it will be more difficult to verify what your company has in cash. Harder, but possible.

After that, you need to stipulate the period of your cash flow – monthly or quarterly, for example. That is, stipulate the period in which the launches, closing, and analysis of the cash statement for the stipulated period will be made.

So, having your company’s initial balance and the flow execution period in hand, we can move on.


2. Identify your income and expenses

In this second moment, it will be necessary to identify all the income and expenses that your business has, customer income, donations, payment of employees and suppliers, rent, electricity, etc.

Then, you will need to enter all the information raised in your cash flow, along with the due dates of each of the income and expenses.

In this way, it is possible to maintain the organization and forecast of cash inflows and outflows, in addition, of course, to help to make payments on time, thus avoiding fines and interest.

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3. Separate your income and expenses into categories

By categorizing your transactions, you can more easily analyze and identify the main features of your business, as well as the main impediments of the enterprise. It also makes decision-making easier.

Categories can be created according to your analysis needs. One option would be to categorize by each sector of your business, for example.


4. Record all cash inflows for the stipulated period

After that, remember to add any new entries to your flow, be it a new customer or an unplanned paid-off debt. Any amount that enters the scheduled period must be recorded.

It is also important to record the receipt forecast when something is paid in installments. Not just cash inflows, but forecasts as well. This will help to have a better idea of how the company will be in the next month, if there is a lack of money for some expenses, for example.

5. Write off all cash outflows for the same period

Do not forget to write off all cash outflows for the period. This is because, if this detail is forgotten, the security of the cashier is compromised, making you count on an amount that is no longer available.

Also, output any other value that wasn’t considered in step #2, okay? After all, it is common that there is an urgent situation or an unmissable opportunity appears and it is necessary to move the company’s cashier.


6. Update releases whenever necessary

Keep your cash flow up to date. For this, the idea is that the control is done daily, at most, weekly. That way, there’s no danger of leaving out an important value.


7. Use a system to facilitate maintenance

Lastly, use a system or app to make it easier to maintain your cash flow. Can you imagine how much work controlling all these variants with pen and paper? So use at least one Excel table, agreed?

This way, it is even simpler to calculate and analyze the closing of your month or quarter. After all, a system or application usually calculates, and issues reports and graphs automatically.

Finally, now that you’ve discovered the importance of this control and learned how to assemble it correctly, remember to put the suggested steps and tips into practice. Thus, your business can earn or maintain the profit you so desire.

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