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Caash Flow

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Cash Flow Management
Althea M Pullins
BUS313
Professor Robert Filling
10/22/2011

A cash flow forecast can be a major problem for any business; it could be even more challenging for a startup company. A negative cash flow is a major problem for small businesses and can lead to bankruptcy. This unfortunate trend will continue due to a business owner’s neglecting the principle of cash flow management. Understanding and developing a cash flow forecast is a key to business success. Most entrepreneurs launch their business with insufficient cash to keep the company afloat. Cash management consists of forecasting, cash flow revenue, disbursement, revenues, and disbursement. In order to be effective in cash flow management an owner must control when a company will collect cash and pay it out. Understanding these steps is an important task because cash is the least productive asset that a company owns. A new enterprise must have enough cash to meet its obligations it a timely manner. Unfortunately many new business owners do not engage in effective cash flow management. Although cash flow management can be challenging it is not an insurmountable task. There are steps a new business owner can take. The first step is to understand business cash flow revenues by preparing cash forecasts that recognize estimated sales each month. The second step is to consider cash flow disbursement such as wages, rent, and supplier cash payment. One of the biggest mistakes an entrepreneur can make is to underestimate cash disbursement, which can result to a financial crisis. The third and final step is to reconcile revenues and disbursements on a cash flow worksheet. An entrepreneur must engage in cash flow management by examining both income and cash flow statement to recognize important trend and the company overall

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