Why it is Essential to Calculate Cash Flow Before Starting a Business

for you as an entrepreneur, it is very important to understand how cash flow works in your business field, so you do not finish it sends the wrong direction.
Fundamentals of cash flow include a few simple things:
O assets are the things your business owns. You probably have a computer. That would be considered assets. Any invoice issued to you, but have not received payment for the property also.
o Your company has an obligation. These are bills that you owe to someone else, the money you owe on any credit cards, bank loans or outstanding bills. Assets minus liabilities equals equity. This is what your job is actually the owner. If you are funded to the computer and paid 50 percent of the law, you have half a computer.
The money is coming into your business is called revenue, income or sales. These all mean the same thing. Money going out of your business calls the costs. These are bills you must pay to do their job like your rent and phone. You probably already know that income minus expenses equals profit, but what you May not be aware of is that you can `t count on the profits to run your business. This situation is called "Cash vs. profit dilemma". Here is a simple example:
For example, you are a retailer DVD player. You do not have much money, so you get a DVD supplier to sell with 30 days delay of payment. purchase price is $ 70. After receiving the product, you can find out that this is not the highest quality, and the only way to resell it to you to change the payment terms for their clients. So, you sell a DVD on a loan for $ 100, with the money due in 45 days. Now you can see that even though you made a profit on paper, still do not have cash on hand, so that the business is going, you will need to borrow money elsewhere. Also, lets not forget the various marketing, transportation and administrative costs, which have to cover on a daily basis. Without any cash infusion of your venture will soon be dead.
So how do you get a handle on what form your business is from the perspective of cash flow? For starters, you need a good record keeping system and a strong business plan. There are many different accounting and planning software available to small businesses, which will save you a lot of time and money. Costs of planning and tracking software is relatively small, it is only a one time investment, but the value for your business is essential. Although, some people like to steal it the old fashioned way, keeping all your records manually.
is in your record keeping system, which is important to know how much money people owe, how much money you owe and your cash balance on hand. When writing a business plan or creating a future budget decisions, you must pay close attention to everything mentioned above. Think of it as a roadmap that will help you to reach the final destination, when you have a business up and running. You also need to know the roll totals your income and expenses for each month and year. However, financial tracking and reporting is not an annual event in conformity with the ritual for their taxes, it is important to check these figures regularly on a weekly basis.
Companies that are successful know their financial position and to monitor on a regular basis. They also have a plan and budget in place, which is used as a guideline for the further development of the company. Companies that are successful do not need all these things. Without fail it has held true in my experience working with small businesses over the years. You just have to know where your business from a financial perspective, and where it goes.