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Why-do-you-need-a-Cash-Flow-Statement

Why do you need a Cash Flow Statement?

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A cash flow statement is an important tool for managing money because it shows how much cash is coming into and going out of a business. Along with the income statement and the balance sheet, this statement is one of the three main reports that are used to figure out how well a company is doing.

What is included in a cash flow statement?

Cash Generated through Operational Activities. It is a section of a company’s cash flow statement that reflects the amount of cash that a company creates (or spends) as a result of carrying out its operating activities over the course of a certain amount of time.

Examples of Operational Activities are:

  • Sales cash
  • Payments to suppliers
  • Loan interest


Cash Generated through Investment Activities. Any and all sources and uses of cash derived from a company’s investments are considered to be investing activities. This list includes anything that has to do with mergers and acquisitions (M&A), such as the buying or selling of assets, the giving or receiving of loans, and any other payments associated with those transactions. In a nutshell, fluctuations in investment cash flow are related to changes in equipment, assets, or investments.

Examples of Investing Activities are:

  • Buying fixed assets
  • Buying stocks or securities
  • Lending money
  • Sale of fixed assets
  • Sale of investment securities
  • Paid back loans
  • Insurance payout

Cash Generated from Financing Activities. The net cash inflows and outflows used to finance a business are shown in a company’s cash flow from financing activities (CFF), which is a subset of the cash flow statement.  A company’s financial health and the efficiency with which its capital structure is managed can be gauged by looking at the cash it generates from its financing activities.

Examples of Financing Activities are:

  • Stock repurchase
  • Money collected from long-term debt
  • Long-term debt payments
  • Dividend payments

In Conclusion

A cash flow statement can help you assess your company’s financial stability, profitability, and future growth. It is used to figure out if a company has enough cash or liquidity to pay its bills and to make predictions about its future cash flow, which is helpful for budgeting.


How can BashoffCFO help

BashoffCFO uses its own cash flow management system to look into every part of your business and give you strategies and tactics that will turn your company into a high-performance cash flow machine. Let’s get started today! or call us at 410-952-6767 for a free consultation.

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What are the 5 most common cash flow issues?

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The phrase “cash flow” refers to the total amount of money that enters and exits your company over a certain time period. From a financial point of view, this is the end of both accounts receivable and accounts payable.

The flow of cash is a crucial factor in the success of small enterprises. Your company will need you to do at least some of the most fundamental accounting tasks, regardless of whether or not you believe yourself to be a “money person.” You need to keep a close watch on your cash flow if you want to be successful as an entrepreneur. If you don’t, you run the risk of getting into circumstances in which your business doesn’t have enough money to keep running.

To get started, it is important to evaluate some of the most frequent cash flow challenges that small and medium-sized businesses face. Below are some common cash flow problems.

  1. Late or partial payments. When it comes to cash flow issues, outstanding payments are one of the most significant obstacles, especially for small and medium-sized businesses encounter. According to the findings of one research, 54% of outstanding bills are paid late. This is a real cash flow problem, since you’ve already done the work but haven’t been paid for it. You will not only lose the profit from the task, but you will also lose the money that the job costs you to accomplish.
  2. Not enough cash reserves on hand. A cash reserve may be thought of as something similar to a financial safety net for your company. You may calculate how much cash reserve your company needs by dividing the total cash on hand by the total cash outflows. This will inform you of the number of days that your cash on hand will be able to make up for the lack of cash flow that is coming in from other sources.
  3. Excessive overhead expenses. In the context of your company, “overheads” refer to any recurring costs that aren’t directly associated with the manufacturing and sale of your goods. The cost of your rent, Internet service, and other utility bills are typical examples. Even while these expenses are necessary in order to keep your company’s doors open, they may be detrimental to your company’s cash flow, particularly if they begin to spiral out of control. When your overhead costs reach a certain threshold, it may become challenging for you to make payments on time, and in the long term, you may find that you run out of money altogether.
  4. Overstocking. There is one area that you need to investigate right away if money is tight, and that area is your inventory. If you find yourself in a situation with negative cash flow and money is tight, you should check into this area. An excessive amount of inventory, also known as overstocking, may have an effect on the flow of money into and out of your company. When you keep an excessive quantity of your raw materials or finished goods in stock, it may tie up considerable sums of money and occupy expensive warehouse space. Worse still, items that have been sitting on your shelves for an excessive amount of time run the danger of becoming obsolete and unsalable, which will result in decreased profits for your business.
  5. Poor or no financial planning. If you don’t do a proper cash flow forecast and don’t plan your budget beforehand, you increase the likelihood of experiencing cash shortages and put yourself in a position where you might find yourself in significant financial problems. It doesn’t matter if you come up with a fantastic financial strategy and an almost precise prediction; if you pursue a business model that results in negative cash flow, you’re going to get yourself into a lot of problems sooner or later.

How to fix cash flow issues?

Increasing your cash flow as well as your profit margins may be accomplished very effectively with the assistance of virtual CFO services. They assist businesses in regaining control of their financial situations and coming to choices that are in the organization’s overall best interest. A virtual chief financial officer may be obtained via outsourcing at a fraction of the expense of paying someone to work domestically.

What is BashoffCFO?

BashoffCFO is a group of High-Impact CFOs, Business Advisors, and Cash Flow Specialists, who focus on accelerating your cash flow and generating profitable growth. We work to rapidly increase your profitability, radically improve operational efficiency, and help you achieve exponential growth. 
Discover how BashoffCFO may help you succeed faster! Visit www.bashoffcfo.com or call 410-952-6767

5-Ways-to-Improve-Your-Companys-Financial-Position

How to Improve Your Company’s Financial Position

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To improve your company’s financial position, you need to take a detailed look at it and correct the aspects that are not functioning well. There are a variety of factors that influence how well your company’s finances are doing.

The following is a list of actions that you can start taking right now that will help improve your company’s financial position:

  1. Curb Your Expenditures. One of the most efficient ways to strengthen your company’s financial position is to reduce your expenditure to a level that is more easily manageable. Conduct a comprehensive analysis of your business to discover whether or not it is possible to locate more cost-effective alternatives to the supplies, equipment, and services that it requires. Investigate the possibility of obtaining bank accounts and insurance policies that have conditions that are more to your liking. Investigate the possibilities of making bigger payments on a more frequent basis or delaying them so that you may maintain a greater quantity of liquid assets in your possession.
  2. Maintain monthly records of all cash transactions. The most basic study of your company’s total financial position requires three financial statements: a balance sheet, a cash flow statement, and a profit and loss statement. If you do not have these three financial statements, you cannot undertake the analysis. Because you will be referring to these statements on a regular basis, you should make it a point to acquire in-depth knowledge of each one.

    On a balance sheet, your assets, liabilities, and total net worth are all weighed and measured against one another. A cash flow statement, which may also be referred to as a statement of cash flows,” is a kind of financial document that details an organization’s cash inflows as well as its cash disbursements over the course of a certain amount of time. It shows how things like running the business, making investments, and getting loans create cash and how that cash is then spent by the company. Furthermore, the amount of interest and income taxes paid by your company is detailed on the cash flow statement. The statement of profits and losses provides an indication of how your business is doing financially as a whole. It does this by contrasting the amount of money your organization is producing with the amount of money it is spending.
  3. Chase down overdue payments. If any of your payments go unpaid, it might have a significant negative impact on the cash flow of your business as well as its overall financial health. If this keeps happening to you, it might be time to call a debt collection agency for help. This may be the case if you discover that this is a recurring issue for you. In the meantime, you should make it a routine to often remind debtors of the obligations they have. This should become second nature to you. When establishing sales agreements, you should also make sure that the conditions are crystal clear about when the money is due as well as the penalties for missed payments.
  4. Consolidating one’s multiple spending obligations. When searching for ways to improve the company’s financial position, it is essential to take a detailed look at the business’s outstanding obligations. This will help you determine which measures will be most effective. If you have a significant amount of debt, you should assess whether or not it would be advantageous for you to consolidate that debt. When you combine all of your outstanding debts into a single monthly payment, you may often save costs and free up more time for yourself. It is advisable to carry out some investigation and consider a number of different possibilities before settling on a brand-new plan or arrangement.
  5. Improve the performance of your marketing initiatives. If you feel that your company’s marketing is falling behind the times, now is a great opportunity to study several tactics that might bring it up to speed. E-mail, social media, video, and retargeted advertising are some of the modern marketing channels and mediums that should be considered for use. Conduct experiments on all of your different advertising strategies to verify that you are getting a satisfactory return on your financial investment.

Why hire a Virtual CFO

A virtual CFO contributes to organizational leadership by keeping tabs on all the money matters, both now and in the future, through continuous strategy development. They are in charge of tasks that look to the future, such as budgeting, forecasting, vendor partnerships, tax strategies, compliance issues, and planning, all toward a better financial position. Do you need support to improve your company’s financial position? Call 410-952-6767 or contact us today for a FREE consultation.

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What is Free Cash Flow and How does it work?

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Free cash flow, often abbreviated as “FCF, is an efficiency and liquidity ratio that determines how much more cash a firm earns than it uses to operate and grow its business. It is calculated by deducting capital expenditures (CAPEX) from operational cash flow. For investors, free cash flow serves as an indicator of a company’s financial performance, which affects how much a company is worth. For small business owners, FCF helps them figure out if their business can grow, change, or make more money.

What are the types of Free Cash Flow

It is not always clear what is meant when someone mentions FCF. People may be referring to one of several metrics.

Here are the two most common types:

  1. Free Cash Flow to the Firm (FCFF).  This is the cash flow available to all funding providers (debt holders, preferred stockholders, common stockholders, convertible bond investors, etc.). It indicates the excess funds that a company would have if it had no debt.
  2. Free Cash Flow to Equity. This is the amount of cash that a company generates that could eventually be distributed to shareholders. It is determined by subtracting net debt issued from capital expenditures and adding cash from operations.

How Free Cash Flow Works

When a business has positive free cash flow, it can pay all of its monthly bills and still have money left over. Businesses that are performing well and have rising or high free cash flow metrics may desire to grow. Growing the free cash flow of a company attracts investors. These businesses can invest their extra income to get a return. On the other hand, if there is little money left over after paying for business expenses, the free cash flow is minimal. Because of this, investors may be less interested in the company because it may be less likely to make money in the future.

Having difficulty monitoring the financial performance of your business? Call 410-952-6767 or contact us today for a FREE consultation.

Companys-Ability-to-pay-1

Why does Liquidity Matter to Businesses?

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To stay solvent, businesses require money. Your business will struggle to succeed even with strong sales if it doesn’t have the cash to operate. However, examining your company’s cash flow status requires more effort than checking your bank account. Liquidity can be used as a metric to assess their capacity to meet short-term financial obligations. It serves as a gauge of your company’s capacity to turn assets—or anything else it owns with a monetary value—into cash. It is quick and simple to turn liquid assets into cash.

What is Company’s Ability to pay

A company’s ability to pay its short-term liabilities—those that are due in less than a year—is measured by its liquidity. For instance, you may determine that you have enough cash on hand to cover all of your anticipated expenses by looking at your current and future obligations. Or you could decide that you need to use additional assets and investments that can be turned into cash. The more liquid an asset is, the simpler it is to turn it into cash. 

Why is Liquidity Important?

The investments and assets that your business possesses have financial value. And liquidity refers to how soon, should the need arise, you can access this money. Here are a few reasons why it matters to businesses.

  1. Tracks the financial health of your business: You can learn about your company’s current financial performance and future financial planning by measuring liquidity.
  1. Liquidity Planning fills the gaps between when the business might run out of cash to pay for anticipated obligations: This involves coordinating the bills you anticipate receiving and the invoices you anticipate sending via accounts receivable and accounts payable. 
  2. Provides visibility for possible future investments or business expansion. When doing liquidity planning, you’ll also be keeping an eye out for times when you might anticipate having extra money that could be used toward other investments or business expansion.

How can a CFO help with liquidity?

The existence of economic uncertainty may cause you to continue to experience capital pressure in your company. Maintaining a steady flow of cash is very essential in order to satisfy unplanned obligations and pay for unanticipated expenses. When something like this takes place, it is the task of the Chief Financial Officer (CFO) to develop plans that will both increase the amount of money coming in and keep the amount of money going out under control so that the company may have the greatest amount of liquidity possible.

Need a virtual CFO to help you with liquidity? Let’s get started today! or call us at 410-952-6767 for a free consultation.


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Why Profitable Companies are failing

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Profitable companies have the same chance of going out of business because of cash flow problems as companies that don’t make money. Your cash flow might soon be impacted if your expenses are high or you are investing your revenues back into your business.

To be clear, cash flow does not equate to profits. For a small corporation that needs to make investments in assets in order to grow, the situation where profit and cash flow are at odds is very typical. The reasons are always seen on the balance sheet.

The ability of a business to pay its bills is measured by cash flow. The cash received less the cash disbursed throughout the time period equals the cash balance. This is where managing cash flow can get challenging. Based on a U.S. Bank study, poor cash management accounts for 82 percent of business failures. Small business owners and CEOs often have to make choices that will have a long-term negative impact on their company’s cash flow.

What Cash flow problems are caused by business decisions

Many companies are struggling with cash flow because they don’t meet their target margins and are unaware.  A company is in trouble when it does not have the necessary profits, its customers pay in 30 days, and payroll is due today. A working capital requirement is what is meant by this. Before receiving the final payment, the business must pay its payroll, and so working capital is required. 

  1. Poor Pricing Strategy. The most common source of cash flow problems is poor pricing. The key to maximizing cash flow is to price your products and services profitably.

    Understanding your figures is the first step in pricing. When analyzing prices, your profit margin is a crucial measure to be aware of. Your company’s profit margin will show you how much it profits from the revenue it generates. If your profit margin is poor, either your costs or your price are out of line, or both.

    You’ll always struggle with cash flow problems if you don’t have a strong and consistent profit margin. You can gain insight into your pricing and cost data and determine whether anything needs to change to help improve your company’s cash flow by reviewing your profit margin and monitoring it over time.

  2. Hiring and Letting go.
    1. Employees: While both hiring and firing are challenging, they are vital steps that promote profitability. The second most crucial cash flow decision is who you recruit or fire. You need employees who will fit into the culture and are passionate about contributing to the growth of your company. If this isn’t currently happening, you’ll have to follow the proper procedures to fire workers who aren’t a good match for the business and are cancer to the culture. People who are unhappy at work will definitely have a detrimental impact on your company’s long-term development.
    2. Clients/Customers: Before bringing on any new staff, identify which clients should be dismissed in order to increase revenue and profitability by bringing in clients with higher profit margins in their place. You will harm your business if you hold onto low-margin clients out of concern for your cash flow or because you can’t find a client with higher margins to take their place. Don’t be afraid to let go of low-margin clients – after all, Low Gross is Grief (LGIG). This means that the clients with the lowest profit margins can cause the company the most trouble and eat up its staff members’ valuable time. You’ll have a happier crew and a more successful company if you get rid of those customers.
  3. When and where money is spent. Knowing where the business spends its money is a major one. Maslow’s Hierarchy of Needs comes into play if there are cash flow issues, and you will naturally fall back on what is stable and safe for you as a business owner. 80% of businesses that fail do so due to poor cash flow and as a result, owners are choosing not to invest because they are afraid to spend money.

Businesses shouldn’t let short-term financial issues keep them from making wise long-term choices.

A business would not be able to seize opportunities if it is experiencing cash flow issues. Consider the scenario in which you are a supplier and your largest client contacts you about a recent agreement that didn’t work out. They have a sizable supply of widgets and are aware that you use them all year round. They promise a 25% discount if you buy it all at once. That means a lot to you! Because of your lower costs, you have an immediate pricing edge in the marketplace. but not if you lack the money to complete the transaction.

How to Make the Right Decisions

Having best practices and foresight in your pricing, hiring/firing, and spending will help increase cash flow and help your firm prosper regardless of what kind of business it is. With the correct actionable financial intelligence, you can accomplish many of these criteria and evaluate how your firm is doing and where it needs to improve.

Why hire a Virtual CFO

Because cash flow is essential to the operation of a company, using the services of a virtual chief financial officer (CFO) may be beneficial to you in developing a sound plan to keep track of your present cash situation and forecast what your future cash position will be like.

Find out how BashoffCFO can help you. Let’s get started today! or call us at 410-952-6767 for a free consultation.

Positive-and-Negative-Cash-Flow-Whats-the-Difference

What is Positive and Negative Cash Flow?

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To have a solid prediction of what your business’s cash situation will look like in the coming months, you need to put together a cash flow forecast. This is important for future planning so that you can make the right decisions for your company’s growth.

From a cash perspective, your cash flow forecast will tell you when it is safe to expand, add more employees, or purchase additional equipment.

The key to being able to read and use your cash flow forecast is understanding the positive and negative cash flows and how they impact your business. Understanding these two concepts and what they mean for your business will make your cash flow forecast a vital tool for business management.

What is positive cash Flow?

Positive cash flow means a company has more money moving into it than out of it or the receipt of more cash than was paid out. It means having to spend less than the amount of cash you received from your customers, new loans or investment, or sales of assets that you owned.

Having a positive cash flow means that you would not need to use the salaried income to cover expenses and therefore enables you to quickly expand your portfolio.

And as your cash flow is measured over fixed periods of time, typically a month, if you are cash flow positive for several months in a row, this means your business is accumulating cash and your bank account is growing over time.

What is negative cash flow?

Negative cash flow means a company has more money moving out of it than into it. It is the result of paying out more cash than receiving. An example of negative cash flow is a property that costs more money than you earn as rental income.

A business has negative cash flow when cash spending on expenses like payroll, marketing, rent, insurance, and other services is more than the cash coming in. Another cash spending that may lead to negative cash flow includes spending cash to purchase assets like inventory, vehicles, and property.

And when your business has negative cash flow, your bank accounts are being depleted over time and you will have less and less cash.

Do you want to reverse the trend of negative cash flow that you’ve been experiencing? We can help you! Call us at 410-952-6767 for a free consultation.

Is-your-Business-Adaptable-3-Questions-to-Ask-Yourself.

Is your Business Adaptable? 3 Questions to Ask Yourself

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Do you have an adaptable plan that guides your business into the future?  We all need a roadmap to help us get to our destination-and that roadmap must have options for changes along the way. Many companies focus solely on day-to-day operations and do not realize how frequently they must adapt to survive and thrive in today’s rapidly changing world full of uncertainty, disruption, new technologies, and constant risk. As any successful business owner will tell you, remaining agile is a key component to success. 

Here are 3 questions to ask yourself to help determine just how adaptable your business is.

  1. Are you focused more on past accomplishments than future goals? Perhaps, you have had a great quarter and profits are up, don’t let this take your focus off what’s ahead. Always maintain a strong sense of the next goal.  You should be constantly working towards improving yourself and your business even if at the current time you are performing profitably and efficiently.
  2. Do you know what others are saying about you? Customer or client feedback is crucial to finding areas of improvement. The more you know about how others view your organization, the better you can adjust where needed. Having a better idea of what works or what doesn’t means you will know how to invest your time, money, and resources for the best return.
  3. Are you watching social, economic, business and technology trends? It’s vital to your success to be aware of all the changes around us that could have an impact on your industry. Ask customers what problems they need solved, attend networking events, read publications, keep in touch with colleagues,  review your business on a consistent basis and most importantly, listen and look for changes.   

This quick self-examination is just a start. Get the help you need to thrive! Call 410-952-6767 and get your free FREE S.W.O.T analysis today.

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