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What is and how to do Cash Flow?
In this article we will talk about:
- Why worry about the installment of revenues and expenses
- How to use installment in your cash flow
- Start controlling your cash flow correctly
It does not matter if you are part of a small business or a large organization, the truth is that everyone does everything possible to pay off payments and cash flow. In most cases, your customers will want to pay off the purchases they make from your company, and on the other hand, your organization will try to split payments to suppliers.
The logic is simple and easy, the more your company or area use the installment of expenses, the more money it will have available in the present, ensuring greater stability. Obviously this may generate a need for cash in the big future, so all care is little when planning future payments.
Likewise, if you do not take care, overpayment of revenue may cause insufficient money to be made for the company to be made, making concern about the way your company manages cash flow and the accounts payable and receivable.
If you have already realized the importance of controlling the installments you receive and pay, you are a step ahead of a good portion of managers. Now let's see exactly how to use spreadsheet cash flow from light:
Starting with the revenues, let's assume a consulting firm that closed two projects in January of 2016, one in installments in 6 times with the price of R $ 3.000 and another in installments in 12 times with the value of R $ 12.000.
As we are in January, if we look at the launches of these revenues in February, we will see that the balances of the cards is R $ 1.500, which corresponds exactly to R $ 500 of the first installment of 6 and R $ 1.000 of the first installment of 12 automatically scheduled by the worksheet.
It is worth keeping track of the payments so that if they have not been paid, you can email them with a reminder of the payday and, depending on the situation of the company, make discounts for prepayments. To close our installment of revenue, it is worth looking at the month of August, which is the month following the last payment of the installment in 6 times. See that the worksheet automatically disregards the R $ 500, with R $ 1000 of installments receivable.
With this type of analysis we will be able to have a good idea of the accounts receivable of the company with much less work and time spent filling in the announcements that we already know will occur.
Turning now to the installment of expenses, let's just imagine a major expense, paying R $ 10.000 to a vendor installment in 5 times. Once again we will go back to the January tab and see that the release of this expenditures has been done:
See that doing a February cash flow analysis, we had a month that got the red card balance in R $ 500.
This already shows us that the tendency is to continue to get worse, since we still have more 4 months with debts in the amount of R $ 2.000 per month. The forecast is that these installments will force us to request a loan or take other measures as strategies to increase revenue.
Again, automatically and without any work, the worksheet has indicated exactly all future expenses with your card. Parceling may be good, but be careful not to turn your future payables into a snowball. Best of all is when you align these two views of future installments (income and expenses) with a good analysis.
Keep an eye on your Accounts Payable and Receivable
Na spreadsheet cash flow which I am using as an example for this article, all financial information is automatically compiled into a payables and receivables table. As you can see below (in the specific analysis of the months of October, November and December), we have two months where the need for cash shows us the importance of finding alternative forms of revenue or cutting costs.
Although I know that in everyday life, the present speaks louder than the future, having this eye on your bills to pay and receive can be the difference of facing months of loss or not. Another way of analyzing these same information, but in a more visual way, is with a graph.
Whenever the red line is above the green line, it is a warning sign and that you will need cash for the month in question.
I hope you have understood the importance of controlling installments correctly. With the cash flow worksheet this job becomes much easier, since once the postings are completed, all reports are generated automatically.