Understanding cash flow is key to the success of any business! 🤑 We’ve got your attention now, right?
Well, we want to see you succeed just as much as you do! Mwah 😚 So, here’s the low-down on cash flow.
Cash flow is a measure of the amount of money that comes into and out of your business during a specific period of time. And, it’s extremely important to track it.
All businesses require funds for both day-to-day expenses and long-term planning.
Day-to-day, it’s necessary for:
Tracking your cash flow also means you don’t need to be psychic when it comes to projecting the future of your business. 🔮
This will help you to:
The formula for cash flow is Net Cash Flow = Total Cash Inflows – Total Cash Outflows.
So, if you have:
To answer your question, no. Cash flow is the net cash generated by a business in a specific period of time. As we know, it’s calculated by deducting cash outflow from cash inflow.
E.g. £50,000 (cash coming in) – £25,000 (cash going out) = £25,000 cash flow
Whereas, net income is the amount a business makes after deducting expenses, taxes etc.
E.g. £5,000 (Total Revenue) – £1,000 (Total Expenses) = a Net income of £4,000.
Revenue is the amount of money made from sales of a company’s products and/or services during a specific time period (normally a year), before any expenses, taxes etc. are deducted. 📅
Like a weather forecast, it gives you insights into the future. Specifically, it gives you an idea of your business’s projected net income, expected costs and expenses, and estimated outgoings.
And, it helps you keep your head in the game. 🏀
Like you’d take an umbrella out on a forecasted rainy day, this forecast helps you make decisions about whether you need to cut expenses, generate more income, or carry on as you were. ☂️
Have you already guessed it? 🤔 To calculate your cash you’ll need to keep track of your business’s income and expenses. Luckily, we’ve got just what you need.
Our free bookkeeping tools can help you keep track of your income and expenses all year, every year! Oh, and they’re free.
Mic drop 🎤
Our accounting software gives you a 360 view of your finances. With everything all in one place, you can keep track of the money coming into your business.
Upload pictures of your receipts directly to TaxScouts and let our AI-powered data extraction tool pull your spending. Store them online until you’re ready to use them.
Impressed? Well, there’s more where that came from.👇
Now you understand why it’s important to the success of your business. So, waste no time and cash in on your new knowledge💰
And, don’t forget to use our free bookkeeping tools along the way. We’re here for the journey 🚗
Manage your self-employed finances in one place with 10/10 bookkeeping tools.
Or see our Guides, Calculators or Taxopedia
