Inside the VCFO’s Toolbox: Cash Flow

Inside the VCFO’s Toolbox: Cash Flow

Every business leader has a vision, and to make this vision a reality, every leader needs an advisor that can determine what practical steps should be taken to reach their goal.  In the world of business finances, a Cash Flow Report separates reality from fantasy, and is one of the reasons your Virtual Chief Financial Officer will be an indispensable part of your team.

Determining the Quality of Your Cash Flow

Cash flow can be either positive or negative. When your company account is receiving more cash than it is paying out over a period of time, you will have a positive flow of money. This usually means that your company is receiving more money in sales of products or services than it is spending on equipment, overhead, and salary, which results in a good, positive cash flow.  

However, having a positive cash flow can also be deceptive; it may simply be the temporary result of taking out a business loan or result from selling off spare inventory and equipment. These temporary gains could lead to reduced cash flow in future months.

How Does Your Cash Flow Affect Your Decision Making?

Positive cash flow is the basis on which your business can absorb unexpected shocks, pay for expansions in operational capability, and recognize when targeted profit goals are within reach. However, negative cash flows can also be a necessary part of life for every business, especially during start-up and periods of rapid expansion.  

So the goal of a Cash Flow Report during these times is to determine if your business finances will remain strong enough to last until the expected revenue increases finally appear and bring your cash flow back into a positive result.

Planning For Future Growth

Because of the speculative nature of setting future expectations, a solid grounding in reality is required. That is why the Cash Flow Report is such an important tool in your VCFO’s toolbox; it can see which investments have the best chance of resulting in future revenue gains without putting the business at risk of bankruptcy over time.

Because of the strategic nature of these decisions, we like to say your VCFO will be an architect designing the profitable business you have always envisioned. 

Meet with your VCFO today to create your blueprints for future success.

Contact Abigail Y. Murray CPA, LLC