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The financial sector can be considered as the heart of any company. It is through it that the organization's real situation in terms of cash becomes clear, identifying if there is an opportunity to make investments to improve the operation or if there is a need to resort to some solution to get out of the red. To have visibility of this, it is necessary to resort to the cash flow analysis.
From the work to map expenses and receipts, it becomes clearer whether your company is operating in a positive or negative way. But what does it really mean to make a cash flow?
Throughout the content, you will understand the details on the subject and know the best way to simplify your financial processes, whether when you need to reverse a negative cash flow situation or get more strength to make new investments. Check out!
What is Cash Flow?
Cash flow is a financial report that records a company's cash inflows and outflows at a given time . It is one of the most essential elements in the financial management of a company, as it is an important indicator of liquidity. It shows a snapshot of the current cash situation and a forecast of future cash.
Within the report, it is essential to have information about the company's income and expenses. This information can be found in the company's accounting records and it is important to sort them in order to be able to determine the balance for the period (usually a month-to-month analysis is performed) and estimate future cash flows.
At the end, a balance value is found, which can be negative or positive, subtracting the values that enter and the values that are leaving. But what can represent income or expense?
- Examples of income : financial receipts from sales, debt collection, leasing, borrowing, interest, prepayment of receivables , among others;
- Expenses or cash disbursements : invoice payments, tax payments, salary payments, loans, fees, water or electricity services, among others.
If the balance is positive, it means that the income for the period was greater than the amount spent on expenses. If the cash flow shows a negative result, it means that the payments were higher than the income.
Why is it important to count on cash flow?
The importance of preparing a cash flow statement is that it allows us, for example:
- Anticipate future deficits or cash shortages . In this case, the company is already able to resort to financing measures or access to credit in advance;
- Establish a solid foundation for applying for credit . If the decision to seek credit options needs to be taken jointly, whether by management, investors or other decisive parties in the organization, having a business plan with clear cash flow will help in the best financial management strategy;
- Define the investment plan . If we have accumulated positive balances over some period of time, part of this balance may be invested in the market with the aim of generating an additional source of income or expanding current ones. This can happen with investments in technology or equipment to improve the company's management, to cite an example.
The cash flow statement has this characteristic of identifying and documenting everything that actually enters and leaves the business, such as sales revenue or payment of bills. But in practice, it does not use terms like “profit” or “loss”, as it is not related to the income statement.
Only with this cash flow can we quickly know the company's liquidity , providing important information that helps to make the following decisions:
- Can we make a purchase with immediate payment, to get a discount, or is it necessary to request an installment plan?
- Can we extend credit to our customers?
- Are we going to anticipate receivables now or in the following month?
- Can we pay scheduled boletos on the due date or should we ask for a delay?
- Can we invest in new hires and projects?
In addition to the spreadsheet or document focused on tracking cash flow and its results over time, all input and output information must be included in your ERP .
What is the role of Cash Flow when looking for financial services?
Cash flow also affects your company's ability to grow. When it is positive, it offers more capital to invest in your business expansion plan. After all, the more money you bring into the box, the more freedom you have to reinvest.
Likewise, negative cash flow forces you to use cash reserves on accounts payable rather than expanding the business.
If you are experiencing negative cash flow due to payment problems from your customers and therefore are unable to meet your obligations on time, this could affect your ability to obtain a loan or other credit options in the future. In this case, relying on financial services is essential.
Do you understand the relationship between one end and the other? It is from its flow that it becomes clear whether it is necessary to seek a financial solution.
If that's your case, how about simplifying financial processes, which are admittedly always bureaucratic? Here the best way is to connect a financial services layer with your management software .
That's right! The ERP is the key to achieving simplified access to financial solutions, as the system has all the necessary information and brings clarity about your current cash flow. But is your ERP ready to anticipate receivables ?
Skyone Marketplace: solution to connect a layer of simplified financial services to your management software
Having arrived at this point, it is already clear how the ERP, an element present in the heart of every company, can support the monitoring of cash flow. Several companies carry out the financial control of their business through management software .
But it can play an even more important role: through its ERP, it is already possible to count on a series of possibilities connected with financial institutions that offer transparent, secure and digital financial services.
With Skyone Marketplace , your organization takes an important step towards making any financial decision easier. This solution allows you to directly connect the ERP, which concentrates its entire layer of cash flow information, with partners in the provision of credit.
The Skyone Marketplace brings together a series of benefits for your organization:
- Best market rates;
- Convenience in financial services;
- Minimal bureaucracy;
- 100% digital;
- Better user experience;
- Ease of making financial decisions.
How about taking this important step for your organization, going beyond cash flow? So connect Skyone Marketplace to your management software Just get in touch to speak to one of our experts .
