TO #4 How do cash flow activities help my business?

Your cash flow is your daily reality check. By keeping a close eye on it you make sure to have quick answers to questions like Do I have enough money to pay all salaries at the end of the month? or How did my income fluctuate during the last year or activity?

Your cash flow gathers all inflows and outflows, but there are situations where a specific transaction does not come from your operational activity (e.g. loan). Given this situation you would want to exclude the loan from your financial analysis in order to get an idea of your daily business performance, excluding the external help you might get. In order to build a clear image of your different inflows and outflows, depending on your business activity, consider using cash flow activities.

Cash flow activities basically represent different ways in which you make or spend money for your business. Use them and check how healthy your company is.

Operating cash flow → inflows and outflows generated from your daily operational activity, from selling your products or services Include here all your sales and the expenses incurred by your daily operations, such as salaries, rent, utilities, suppliers, taxes or bank commissions.

The operating cash flow will give you more information about your business capability, whether it is profitable and can grow internally or needs some external support.

Investing cash flow → inflows and outflows generated from buying or selling company assets You just bought some new laptops? Or maybe sold a specific equipment that is no longer suitable for you? You’ll find these transactions in the investing section of your cash plan.

The investing cash flow, as its name suggests, will help you to understand how much you invest in your company’s future.

Financing cash flow → inflows and outflows generated from (external) financial help (banks and shareholders) Include here transactions such as a bank loan, the payment of your installments or interest rate, any loan from the shareholders and the repayment of it.

The financing cash flow is very useful to check how dependent your business is on external financing. Careful monitor this section of your cash flow and make sure that you are not suffocating your company with too many loans.

From a cash flow perspective, a healthy business will generate enough cash from its operating activities to support daily expenses. This means that the company can grow on its own effort and resources. However, there are situations when external loans are normal (e.g. companies with a fast growth). And if you’re not there yet, do not worry. Every company is different in its way of being and growing. Make sure you fully understand your specific situation from a financial point of view and make informed business decisions.

In order to have a clear understanding of your financial position in real time, keep in mind that ThinkOut can help.

1. Connect your banks or import bank statements.

2. Automatically import the transaction history.

3. Check and confirm the automated categorisation of your past transactions. Analyse in a couple of minutes your financial history organised on cash flow activities and categorised on a predefined income/expense structure that you can easily edit.

4. Check your real time financial position anytime you need in ThinkOut. The import from your bank account is done automatically every morning.

5. Start planning for the future and make sure you can support the operations for the next 3 to 6 months.

6. Link forecasts with the actual transactions from the bank account. ThinkOut will help you to keep track of overdue invoices so you do not have to worry about it anymore.

If you have any questions or you need help, please contact us at support@thinkout.io.