How to Use Cash Flow Analysis to Make Better Business Decisions

For understand the businesses financial health, analyzing cash flow is most essential. You can make more informed decision for your businesses by knowing the flow of cash in and out.

1. Gathering Financial Data: Gather statements like income, balance sheet and cash flow.
2. Analyze Cash Inflows: Know from where your cash is coming such as sales, investments or loans. Predict your future cash inflows, by looking the sales data.
3. Analyze Cash Outflows: It include operating expenses, rent, utilities and loans repayments. Also separate your fixed cost from variable cost.
4. Create a Cash Flow Statement: Take summary of your cash inflow and outflow over specific month or year. In order to find the net cash subtract outflow cash from inflow cash.
5. Identify Cash Flow Patterns: Identify how the fluctuations happens whether it is seasonals consistent shortfalls. Also check outflow cash exceeds inflow cash which means potential cash shortage.

For details read the blog Finanshels.