editing disabled

Cash flow refers to the flow of money into the business through operations or financing and out of the business through expenses or investments. Cash flow, as reflected in the accounting statement “statement of cash flow”, reflects the financial strength of the business.

Managing cash flow

Periodically a business may find themselves with inadequate cash to pay their bills -- when cash from customers is coming in too slowly to pay suppliers and employees. Preparing cash flow projections can help to anticipate this situation and thus allow the business owner to take steps to avoid the situation. Improving receivables and managing payables is the principal approach to managing cash flow. Arranging for a line of credit can prepare the business for the potential shortfall. (How to better manage your cash flow, 2003).

Intermingling of money between business and personal/family use can impact business cash flow

Some family businesses intermingle money between their business and personal use. Cash flow problems can arise in the business if this intermingling leads to an excessive amount of money being diverted from the business. (Zuiker, et.al. ).

Cash flow as part of succession planning

It is important to assure that the owners exiting the business will have sufficient cash flow during their retirment. If this is not established, succession planning is unlikely to proceed. (Trainotti).


Further reading and external links

Article contributors

This article is a stub. You can help Family Business Wiki by expanding it.

Categories: Control