Cash Flow Plan – How to become Profitable in the Long Run

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Cash Flow Plan – How to become Profitable in the Long Run
Every business entity has money coming in and going at all points of the day. Some of them are directly transferred to and withdrawn from the bank accounts while some transactions involve cash directly going out of the concern or coming in. This flow of money, that has physical existence, is known as cash flow.  For a business concern to function effectively there must be a cash flow plan so that the business does not have to face situations where there is a scarcity of availability of cash.  There must be business personnel who are knowledgeable to make such plans in the organization. It mainly involves forecasting the situations that may arise and the how the executives see the company down the line. Studies are done on what brings in cash and what leads to an outflow of cash, so that a trend can be figured out. This trend is then analyzed to help make a plan that would be right for the company’s growth.  The expenditures of the entity must be classified into ones that are recurring and non-recurring. That way, an idea about the total expenditures expected can be developed and on the basis of that, the basic cash requirements that must be there can be decided upon.


If there is no cash flow plan in place, it leads to major problems in the future that can be harmful for the business concern. Without a plan, expenditures may exceed the cash coming in and that would lead to extreme measures of raising capital like firing employees and down-sizing the firm to reduce costs. That would lead to more adverse situations bringing upon decline in the business of the firm. The first thing to do therefore is to make a budget that will add clarity to the process of making plans. It will give an idea about the basic cash needs of the organization and the sources of the cash inflow. A corporate budget involves taking into account all kinds of transactions and to make the job easier, budget software may be used. A budget software helps to have a control over the using and coming in of money, to reach the financial goal and to have a possibly more accurate budget estimate than the one that is done manually. The budget software needs to be given all the correct data, so that it can generate a budget that would help the financial managers to have an idea about the strong and weak areas in the finances of the company.

cash flow plan

The Cash flow mojo is software that is used by the personnel to get an idea on how to manage the cash flow and plan accordingly. It is an online software tool that is easy to understand and convenient to use as it is user-friendly. It is widely used in different countries around the world. It helps in maintaining a proper cash balance. One must keep the debt trap away from the organization which will only be possible with a proper cash flow plan.  While making this plan, one must always keep the worst case scenario in mind so that the organization is always ready to avoid a situation involving scarcity of cash. While one is determining the future sales and income, it should not be a very optimistic view as it is uncertain. The figure arrived at must be something that is sure to be achieved in the future. Also, while the future income in the form of sales or fees is being derived, it must be taken into account that the entire amount may not be received in cash. The cash transactions that are bound to take place regularly and are fixed like rent can be considered fully while making the plan. It is not possible to forecast future cash flows exactly and therefore there must be a separate fund to meet sudden cash needs. The amount to be kept in the fund must also be planned keeping all the factors in mind, so that it is neither too much or too less.  The investments of the business concern also need to be planned in such a way keeping in mind the amount of cash that will become unavailable for spending once it is invested and the amount of return that is expected out of it. The time period of the investment is an important consideration to find out whether the investment will be profitable or not.
Savings of a business entity is very important and to know how much to save, a cash flow plan must be in place. Even small or middle-sized business entities need to have a plan. Otherwise there may be a risk of running out of business as there can be many unforeseen contingencies that the entity has not made any provisions for. There are softwares available for these small businesses to use that will give them the opportunity to have a proper plan that will be beneficial to their future growth and eventual stability. It is a necessary part of the functioning of a business and therefore must not be ignored. The decision regarding the amount of capital in a firm or company is very important, since the basic functioning of the organization revolves around that. Cash finances keep an entity going and thus there should not be any situation when the firm will face the dearth of cash for the lack of planning.

Cash Flow Plan – How to become Profitable in the Long Run