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Improving Your Cash Flow

April 13, 2006

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In its simplest form, cash flow is the movement of money in and out of your business. It is most often described as the process in which your business uses cash to generate goods or services for sales to your customers, collects the cash from the sales, and then completes this cycle all over again.

The two basic elements of your business's cash flow are the cash inflows and cash outflows. Cash inflows are the movement of money into your business. Examples of cash inflows include cash collected from sales to customers, collections on accounts receivable, and the proceeds from a bank loan or other types of loans. Cash outflows are the movement of money out your business. Examples of cash outflows include paying expenses, purchasing property or equipment, and paying back a bank loan or other types of loans.

Improving your cash flow means:

• accelerating your cash inflows— the flow of money into your business
• delaying your cash outflows— the flow of money out of your business
• minimizing expenses— the amounts you pay for operational costs of your business

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