Why A Cash Flow Plan is Necessary for a Business
Every business has to have a cash flow plan for their business. The business needs to be aware of the amount of cash they need for each and every day of the business. The ultimate goal of every business is to make profits, and there is not a business owner in this world that may have started a business to make the suppliers wealthy. No cash flow management is taught in the school in the world. It paves a classical situation for the business owners to be in control of how much amount is in the bank and not the other way around. With the evolution of technology, one of the many types of software which has really had a profound impact is the cash flow Mojo. In the first place, it is simple as well as effective to use. A step by step guide is provided to the business owners to manage their cash outflows, to be in firm control over the cash as well as their financial destiny. The most important point to understand here is that, it is not only the amount of money you make in business which determines your financial condition, it is how you tend to manage it effectively.
Budgets and cash flows
For an effective cash flow plan, the budgets have a huge role in the overall scheme of things. It can also be used as a pricing tool in certain cases. There are two basic approaches when it comes to budgeting. One of them is to rely on mathematical models and the other one is to rely on people. In the first model, it is believed that if proper financial models are developed the future can be predicted with a greater level of accuracy. The focus here is on the variables like the inputs as well as the outputs. Though financial spread sheet models are developed, the accuracy of time and money in these models cannot be ruled out any point of time. The other model tends to rely on the fact that no matter whatever information is available, it is the people who are the resources of an organization, and the most important source of information is them. It stresses on the fact that the managers are engaged in the budgeting process in a big way. The managers who stick to this model have their managers develop their own models as well.
Tips for increasing cash flows
A lot of steps can be attributed to the increase the cash flow of a business. In this regard the business needs to pay attention to the following attributes while formulating a cash flow plan.
- Referrals –It is a way of showing your profound love for your existing base of customers. Running a referral program will help you to find the people who really care for your business. One of the effective methods is to send some sort of gifts to your customers
- Promotional return on investment- This is measuring the return on investment on the promotional activities of the business. This can be further segregated into two major modes like online marketing as well as offline marketing. The former may include postcards, letters while the latter may be social media marketing. One needs to understand how this works literally. Take the example a postcard is sent to a customer and the time frame he takes to respond to the advertisement. If he throws that postcard in the trash then the return of investment is over on all counts.
Future of cash flow planning
Before formulating a cash flow plan, one needs to understand what the future holds on account of the cash flow. One area which is to be considered is the internet. With the evolution of the internet, the online media has evolved leaps and bounds in the last decade or so. In fact there are no second thoughts to the fact that it is the age of internet marketing and your potential as well as future customers are hanging out there big time. In this regard, one needs to look at the cost effective programs as they are numerous programs on the internet.
Importance of cash flow planning
Why Cash Flow Plan is Necessary for a Business
Cash flow plan has lots of positive aspects related to the business. It is the process of anticipating the future incomes and expenses along with the major expenditures and coordinating with the investment planning. If one does not have a cash flow plan in place there is a strong chance one may lose control over the capital flow of the business which may lead to major investment mistakes. It clearly specifies the effects of long term deposits as well as withdrawals from your portfolio. Then the cash flow planning brings the investor face to face on what will be the future financial scenario and how this fund can be invested in a systematic and secured manner. It needs to be understood that planning is not a one day process and one has to consider the inflation and the interest scenarios prevalent in the market as well. The future of the business can be ascertained and their investment in a systematic manner is to be understood. In fact the most important part of the whole process is that as individuals and organization most of us understand the role of cash flow planning, but very few people pay attention to it in minute details.
