Why you should always pay attention to "cash flow"

To understand a business in developing the condition or not, then you need to study the financial statements, consisting of: Balance Sheet, Income Statement and cash flow statement. Of these three, the most critical is the statement of cash flows or cash flow. Why?

If you have run the business according to business strategies that have been studied before, the end result of the management of this effort will be reflected in financial statements. The financial statements can be made in weekly, monthly, quarterly or yearly. Good company, at least going to make financial reports at least on a monthly basis, but cash flow should be made weekly. Cash flow of fresh blood is like our body, therefore as head of the company or the person responsible in the financial sector, you should look at cash flow.

If the results of your efforts consist of various products / services, then through a cash flow statement, you will be able to see the products or services are most profitable, the business where the most cost issue, where efforts are moving cepat but a small margin, and so forth. Even you will get to know like what type of customer you are, whether there are changes in consumer demand as seen from the shift in cash flow from sales of products / services. From the financial statements, especially cash flow, you can read everything, and predict how the prospect of selling a product for the next few weeks.

Learn, too, whether on the weekends the cash position is positive or negative? How projections in the next week. There are some products selling different ways, this will all be reflected in cash flow.

By studying the cash flow, you will be able to immediately take steps if there are some products that had limited sales. Are you going to boost sales, or had to sell the discount, or even stop or reduce production of these goods to the next stage, and only sell the goods sold in the market.

In the end, by overseeing cash flow, you will be able to know your company's liquidity position, whether the products and services you sell are still in the safe position. So, how important it is to learn your company's cash flow. You have not done so? Go for it, and see the results, you will be interested to better understand your business.


source :http://edratna.wordpress.com/2007/12/13/mengapa-harus-selalu-memperhatikan-cash-flow/