Maybe you didn’t know, but poor cash flow management is one of the top reasons for business failure. That’s why, if you have a business, you must be extremely familiar with the concept, and all that comes with it, including QuickBooks training. This article will explain everything to you. Do you know what the risks of ignoring it are? Or, how could you improve it? We will also cover other related information because you cannot build a successful business without knowing the things that you should put in the foundation.

What is Cash Flow?

Cash flow is the movement of money in and out of the business during a specific time period. A QuickBooks bookkeeper with the right QuickBooks training will manage to efficiently keep track of this movement. If more money is coming in than going out, it’s net cash flow positive; if more money is going out than coming in, it’s net cash flow negative. Cash flow is usually categorized into three types:

• Operating cash flow – The operating cash flow refers to the cash that results from core business operations, like sales or services.
• Investing cash flow – This refers to the cash used for investing in acquisitions and assets.
• Financing cash flow – The financing cash flow, as the name suggests, refers to cash from or used in financing activities (like taking loans, issuing shares, etc.)

There is a quick and easy formula that you can use if you want to calculate the cash flow of the company. NCF = TCI – TCO, where NCF is Net Cash Flow, TCI is Total Cash Inflow, and TCO is Total Cash Outflow. As you can probably tell, it’s best if the net cash flow is positive, rather than negative, and that is basically the purpose of learning about cash flow management ( https://www.digitalocean.com/resources/articles/cash-flow-management ).

The Importance of a QuickBooks Bookkeeper for Cash Flow Management

The first thing that must be discussed is the importance of having money for day-to-day operations. If you have a business, you already know that there are constant daily expenses. There are things like: rent, marketing, utilities, payroll, and miscellaneous. To correctly manage cash flow means to always have money for these day-to-day expenses, and a professional QuickBooks bookkeeper ( https://www.proledge.com/services/ ) will always ensure that you have the necessary money. Not having money for these types of operations could lead to penalties, late payment fees, and employee dissatisfaction. The next thing that proves the importance of management when it comes to cash flow, is that cash flow influences the decision-making process. Most of the things that you want to do in a business, require money; and, if you don’t have them, you are forced to make certain decisions.

Think about wanting to launch a new product, or you might need another employee, but if you simply cannot afford these, there’s nothing you can do. Now, something that might not seem as important, but it certainly is, is building trust. When it comes to having great collaboration with people, communication and trust are at the foundation. If you don’t meet your financial obligations, you cannot build trust. Your collaborators and employees will surely not be happy if their money is never arriving on time. If you want to be respected and have people do good work for you; you must also respect them by paying on time. For this reason only, it is mandatory for you to have a bookkeeper with the right QuickBooks training.

Proper QuickBooks training can also help your business by providing a clear image of its finances. For example, lenders and investors will take a look at your company’s cash flow before approving a loan, or before investing. A positive net cash flow proves to the lenders or the investors that you will be able to hold your end of the bargain. Again, it’s about proving to others that you can be trusted. Now, think of a great door opening for you, an amazing once in a lifetime kind of opportunity, and you cannot do anything about it, because your net cash flow is negative.

As you already know, business doesn’t always stay the same. The market fluctuates, what people want in a certain period of time can change, and so on. You need to make sure that you have money to keep your business going, even when the business is not going so well. If you have a restaurant on the beach, you are going to have more clients in the summer. While, if you have a restaurant in the mountains, you will probably have more clients in the winter. You must pay attention to this, and manage your cash flow so that you can keep the business going even when it’s not your season.

Some Consequences of Poor Cash Flow Management

To better understand its importance, let’s take a look at some of the consequences of poor cash flow management. Without sufficient cash, you will probably end up with late payment fees, damage to the company’s credit, and maybe even lose collaborators. All of these can only further damage your cash flow; so it’s important to make sure that you don’t fall into this loop, and with the help of a QuickBooks bookkeeper, you can rest assured that your finances will always be in order. A professional bookkeeping company is your best ally in managing the finances and cash flow of your business. In this regard, QuickBooks training is essential, and therefore, make sure that you keep in mind this characteristic when selecting your bookkeeper.

Many businesses that struggle with cash flow, resort to borrowing. And while borrowing is not necessarily a bad idea, the possibility of borrowing again is high. Someone who needs to borrow money urgently because they didn’t manage their cash flow efficiently, has a high chance of finding themselves in that situation again. This could get the business into a cycle of debt, that’s very hard to get out of. As you can see, cash flow management is one of those essential elements when it comes to having a successful business. It’s one of those things you must always pay attention to.