What Does Cash Flow Really Mean for Your Business?

You’ve probably heard the term “cash flow” before, and while the words are relatively simple the concept is not as clear to you. Not only is that okay, but you’re in luck because that’s what we’re going to talk about today.

What does cash flow mean?

In the most basic sense, cash flow is what it sounds like. Keeping track of and understanding the flow of actual money into and out of your business.

The next step is understanding that if you have more money coming in than is going out, you have positive cash flow. Positive cash flows generally indicate a healthy business. And perhaps unsurprisingly if you have more going out than is coming in, you have negative cash flow which indicates a less-than-healthy state.

Conceptually, cash flow is different from other methods of assessing your business because it is a clear view of how much money you have on hand. If you look at it over a year, you might be cash flow positive, but if you look at it week to week, or month to month, you might realize that you owe a bunch of people money for 11 months of the year and you have one great cash flow positive month at the end.

Which begs the question, how are you paying your bills? Does your business feel healthy operating like this?

To me, the study and understanding of your cash flows gives you a wealth of information to work with as you Explore the current state of your business and Develop your plans for an improved future.

If the only way you interact with and perceive your cash flows is through some paperwork your accountant does for you quarterly, you might benefit from gaining some clarity on your own.

Odds are incredibly good you look at your cash flow statements and see numbers that don’t match what you see in your bank accounts.

That disparity is an important one. It implies at least a degree, maybe two or more, of separation between you and what’s actually going on in your business. The report says you had $300k in profit this quarter. Your profit account shows $18k

I don’t know about you but I would be mighty curious and worried if that were me.

So, what does cash flow mean?

I can’t tell you a definition like “cash flow means that color in the sky right after the sun sets and can’t be seen but it’s still illuminating the clouds.”

But hopefully you have a better understanding now what it is. It’s the ebb and flow of money into and out of your business. Knowing what that ebb and flow looks like for you is important and should inform a lot of the decisions you make from when and how to make investments, how much you need to have in short term and long term savings, and just how your business is performing.

Clarity is important.

PS: Have a burning question or a challenge you’re facing in your business? Drop me a message, and not only could I answer it in an upcoming post, but you’ll get my personal insights to help you solve it faster!

Interested in working together? Here’s how to get started:

• Ready to accelerate your business growth? Let’s chat. Schedule a call via my website, and together we’ll uncover your business challenges and the first step toward the results you want.
• We get to know each other a bit and you tell me about yourself, your business, and what your current challenges are
• Want to dive deeper? Book a 60-90 minute intro coaching session, where we’ll work on a specific challenge or opportunity in your business. It’s a low-risk way to experience personalized coaching and get actionable next steps.

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