1 guide on the topic “Cash Flow”: legal obligations, concrete procedures, costs and deadlines.
Cash flow describes the money that actually moves in and out of a business. A profitable company can still run short of funds and fall into difficulty. This page helps founders and managers anticipate their needs and manage incoming payments.
Earning money and having money remain two different things. The income statement records a sale as soon as the invoice goes out. Cash flow, however, waits for the customer to pay. An invoice issued in January and paid in March therefore weighs on the bank balance for two months.
Conversely, some outgoing payments never appear as expenses. Repaying the principal of a loan offers a good example. Likewise, an investment leaves the account in one go but depreciates over several years. Our article on the three key tables of a forecast explains these timing gaps.
A cash flow plan tracks money month by month. Building one takes a few simple stages.
Cover at least the first twelve months. Then update the table with actual figures. You will quickly see where your assumptions drift. To fit this table into a consistent whole, follow our complete forecasting method.
Some situations absorb money without warning. Here are the most frequent ones.
Growth often surprises managers. The more the activity expands, the more working capital it needs. A thriving business can thus run out of money at the worst moment.
A few simple levers deliver quick results. Invoice straight away, on delivery. Ask for a deposit on long assignments. Chase every late payment systematically. Also negotiate the terms your suppliers grant you.
In Belgium, the law also regulates late payments between businesses. The FPS Economy explains these rules. In addition, electronic invoicing speeds up the sending of invoices.
For a temporary need, a credit line can bridge the gap. However, the bank will then examine your cash flow plan. Prepare that meeting with the mistakes to avoid with your bank. Finally, weekly monitoring of cash flow prevents most unpleasant surprises. Juristelo also links your assumptions to the monthly plan, so you can test every scenario.
