Tracking your cash flow is essential to keep your business safe. As part of abusiness's cash flow management, you should create a cash flow statement and make projections. By bringing all the information you have together in a cash flow statement and, separately, creating a forecast of future cash flow, you’ll be able to conduct a good cash flow analysis and have a much greater awareness of likely opportunities and potential threats. Indeed, anticipating is better than having to find solutions to cash flow problems later down the line.
It implies that you ensure to keep good records by taking the time to log company income and expenses, and keep the information timely. Having a clear picture of your company’s financial position will help you spot potential causes of cash flow issues and define how to avoid them.
Keeping a cash buffer, like a rainy-day fund that your business can access in an emergency, can also be a good practice, in case a piece of key machinery breaks down or a big invoice becomes overdue.
If you ask yourself “Why is cash flow important?” and want to know more on cash flow analysis, read our guide on how to make a cash flow forecast.