For those just starting out in business, cash flow may be a fairly new concept. However, this is a concept that shop/business owners should learn because it will stick with you for the rest of your business life.

What is cash flow

?Cash Flow is understood as the movement of money in and out (ie received and spent) in a store, business, project or product some financial product.

Watching: What is net cash flow

For example: When a customer buys a shirt at a shop and pays, that amount is cash inflow. When you import goods, pay electricity and water bills… that’s cash out.

The goal of small businesses/stores is to create a positive cash flow (Positive Cash Flow), that is, how to receive more money in than spend money. This sounds simple, but a lot of businesses have problems with their cash flow. If the revenue is not stable, the payment of regular expenses such as salary, electricity, water… also faces many difficulties. Many businesses generate negative cash flow (Negative Cash Flow), which means they spend more than they receive. It may be because the goods are difficult to sell in that season or they are investing more in the business…

Keeping cash flow positive is a great thing for small businesses. And to report their cash flow, companies will create a Statement of Cash Flows.

What is a cash flow statement

?Cash Flow Statement is a statement of the change in cash flow in a business/store (Amount invested in cash). , money out, money in, cash now… Normally, businesses need to prepare a cash flow statement every month or every quarter to understand their cash flow situation.

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A statement of cash flows consists of three main parts:

Cash flow from operating Cash flow from investing Cash flow from financing activities

You can view a sample cash flow statement here

SUNO sales software helps store owners manage and view monthly/quarterly/yearly cash flow reports simply.

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Difference between cash flow and profit

Cash flow and profitability are two related but different concepts.

Net Cash Flow = Cash Inflow – Cash Outflow

Profit = Revenue – Cost

Many people will immediately ask “Well, what is the difference” because they think that cash inflow is also revenue and cash outflow as well as expenses. But the truth is not so. If you have a profit, you may not have cash (for example, if you sell debt), having cash is not necessarily profitable. Simple example!

You open a store, after that, you have 300 million remaining capital. The first month you make 10 million sales. My friend saw that your business was profitable, so he immediately invested another 200 million for you. So here Cash Inflow = 200 + 10 = 210 million. Meanwhile, your revenue is only 10 million.

Causes of cash flow problems

There are many reasons that cause the cash flow of a business to have “problems” (continuous negative, standing still, etc.). A lot of stores have to close for the simple reason that they can’t differentiate monetization from cash flow management.

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Good cash flow management is a problem because our income is not stable while the expenses that need to be paid are available every month. Low revenue is not a cash flow problem, it’s a product or service problem. So how is the cash flow called a problem? Is when business is good, revenue is high but cash is trapped in inventory or in accounts receivable (money owed by others), is when you owe money to others but have not yet paid… Money still comes it just hasn’t come yet.

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Solving cash flow problems is sometimes very simple and sometimes extremely difficult. In the following article, SUNO will guide you how to effectively manage cash flow. Let’s read together!