Cashflow Statements & Projections
No business can afford to ignore it’s cashflow; it’s a crucial health check for your company, however big or small. In an ideal world you want to have a positive cashflow - meaning that more money is coming in to the business than if going out. If you have a positive cashflow your business will be able to settle its bills and invest in growth. A negative cashflow means you’ll need to find an alternative source of income to be able to pay off debts.
Assessing the amounts, timing and uncertainty of cashflows is one of the most basic objectives of financial reporting. Even profitable companies can fail if operating activities do not generate enough cash to pay the bills. This can happen if profits are tied up in non-cash transactions, such as accounts receivable or stock, or capital investment. Investors and creditors, therefore want to know if the company has enough cash and cash-equivalents to settle short-term liabilities. Cash is King