Cash Flow System

A personal cash flow system can help the average consumer handle family budgeting and other financial issues with speed and ease. Various software products are available that can aide a family in tracking expenses such as mortgage or rent, utilities, groceries, clothing and other needs. By comparing these regular expenses with income, personal cash flow can be easily monitored. Even individuals with limited experience in this area can use this software to create a usable budget and to monitor family spending. In addition to products that meet the needs of anyone who desires to effectively oversee their personal finances, businesses can also benefit from a wide variety of products in this area. Such systems could be centered on basic accounting needs, or could also focus in specific areas such as collecting on bad debt, or making sure that customers make payments in a timely manner. The technology of electronic payments can also keep funds moving into an organization's coffers at rapid speeds. The ability to create statements that clearly explain an organization's movement of funds is a useful feature as well. In addition to software products, there are also many classes and tutorials available that can help the business or individual set up and effective cash flow system.

Many of today's companies are benefiting from the technology of an instant cash flow system. Complicated billing and collections systems that involve mailing bills and waiting for responses can keep needed funds moving at a snail's pace. In addition, the cost of this mailed correspondence can eat into funding availability as well. In some instances, a customer can agree to monthly pre authorized checks that will automatically make payments to a creditor. The creditor then deposits the check into the company's bank account. This saves time for the debtor and keeps the money flowing for the creditor. Electronic pay systems make bill paying incredibly easy for a businesses' customers and helps with cash flow issues as well. Rather than dealing with lost invoices, misplaced bills, forgotten payments, or financially irresponsible customers, automated electronic bill payments eliminate paperwork and costly delays. Of course, such an electronic cash flow system will not totally eliminate all late payment issues, the added funds that will be coming in automatically and on time can be used to help a business grow. Should an automatic payment be rejected due to insufficient funds, businesses do have a means of recourse. Most of these service providers will automatically resubmit pre authorized checks and can often receive payment without embarrassing or even contacting the customer.

Utilizing a cash flow system that employs an electronic payment feature can speed up collection time and increase an organization's available funds. Customer satisfaction will improve when a company offers the customer the convenience of making payments over the phone or online. Sending out monthly invoices and processing paper checks can be far more costly than processing such transactions electronically. Automated reconciliation of accounts can provide an added convenience for business owners as well. Some customers may prefer to do things the old fashioned way and continue to make payments via paper check. A cash flow system can sometimes accommodate both electronic and traditional paper check payment options. In addition, most of these systems can also transfer funds into specified bank accounts automatically. Security issues with this kind of technology are important concerns for most users. A quality system that offers electronic payment options will generally also feature adequate protection from internet viruses and hackers. Other typical features that are offered by these systems could include online electronic checks, bad check recovery, and check by phone. The Bible describes the way God leads believers along the right path. "Lead me, O Lord, in thy righteousness because of mine enemies; make thy way straight before my face." (Psalm 5:8)

An important aspect of a functioning cash flow system is the ability to create clear statements. Such statements are geared toward providing an explanation of exactly where the available money within a company is going. To disregard the importance of this documentation could be considered a very foolish move. Such statements will not only allow a business to see where things are going off track, but to also trace activities that increase available funds. Knowing whether or not a business's flow of funds is following a healthy pattern is indispensable. By measuring incoming and out going monetary gains, these statements provide a valuable source of information to all concerned parties. Items such as future sales or credit purchases will generally not show up on these statements. Information such as accounts payable and receivables are also usually reflected on other reports. The ability to compare activity in past years is also an important function of these statements. Gathering information on investments and inventory and how these areas have impacted available funds is necessary for the smooth functioning of any business venture.

There are also many videos, online courses and workshops that can educate a business owner on how to keep a cash flow system functioning at a healthy level. Some of the topics that may be covered on these videos, courses, and workshops could include strategies for increasing money on hand, dealing with active and passive income, and maximizing sales. It is always good to keep in mind before signing on with any system that is geared toward increasing available funds that these concerns can change with an individual situation. Some organizations can benefit from a longer lag time in regards to monthly bills. In general, the organization that receives the funds will benefit most from speedy repayment, while the venture that is making the payment will benefit more from slower repayment processes.

Cash Flow Analysis Software

Most businesses benefit from using cash flow analysis software to assist in making wise financial decisions. Savvy managers understand that cash flow is the lifeblood of a business and a better indicator of a company's financial stability than profit. This is because profit is calculated, simply speaking, by deducting expenses from revenue. But cash flow is based on the correlation between the inflow and outflow of monies. As an example, let's say that a talented weaver creates beautiful handmade rugs and sells them to a local crafts boutique. The cost of making each rug is $400 and the boutique owner pays $1000. The profit to the weaver is $600. But the contract says that the boutique owner doesn't have to pay for the rugs until they are sold. Thus, the weaver may not receive any payment for several weeks or even months. Using cash flow analysis software, the weaver can track how much actual money is coming into and going out of her small venture. When the contract comes up for renewal, she will probably make different arrangements, such as requiring at least fifty percent (or $500) upon delivery. This way, even though her profit remains the same, her cash flow improves and she has the money to buy additional supplies to make more rugs.

The example of the weaving entrepreneur demonstrates how the importance of understanding cash flow when it comes to managing a successful and financially sound business. By plugging raw data into a cash flow analysis software program, the entrepreneur or company accountant can forecast future income needs and expenses. For example, let's say that the boutique owner plans to participate in an annual regional craft festival attended by several thousand people. Based on previous years, the owner believes he can sell at least one hundred of the weaver's rugs. To fill the order, the weaver needs to buy additional materials and hire a part-time person to assist with some of the work. Because she doesn't have the money to meet these goals, the weaver decides to apply for a loan. By plugging in different "what-if" scenarios into a cash flow analysis software program, this weaving entrepreneur can determine how much to borrow. The analysis can also show how the loan, at varying terms and interest rates, will affect her cash flow and her company's financial stability. Armed with this information, the entrepreneur can shop around for a favorable loan product with acceptable terms and a good interest rate. The analysis can even show how many rugs need to sell at the annual festival for the loan to be repaid.

The information entered into the cash flow analysis software application needs to be as accurate as possible in order to obtain relevant information. Going back to our admittedly simplistic example: the weaver expects to purchase additional materials from a longtime supplier who allows thirty days before payment is due. This data is entered into the program. But the supplier is only able to provide half of the materials that are needed. The weaver seeks out a second supplier who not only has higher prices, but also expects payment on delivery. These circumstances affect the entrepreneur's cash flow forecasts. Because of the higher expenses, the weaver may choose to the amount of money being borrowed or find another source of revenue to come up with the cash to purchase the higher priced supplies. She may continue her search for a quality supplier with lower prices and/or more favorable terms. Or perhaps she'll decide to work longer hours and create all the rugs by herself, thus saving the costs involved with hiring an employee. This decision-making process is reminiscent of Jesus' words: "Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it?" (Luke 14:28). The entrepreneur needs to carefully consider the costs of the opportunity being provided by the boutique owner. Here again, different scenarios can be entered into the cash flow analysis software program so that the entrepreneur can make the best possible decision for the business.

Available software programs range from the simple to the complex. Not surprisingly, the range of prices reflects the complexity of the various applications. Entrepreneurs and small business owners will benefit from software that provides the basics without requiring an extensive learning curve. Even a simple program with spreadsheet templates will increase accuracy. Chief financial officers (CFOs), accountants, and controllers will no doubt require more sophisticated cash flow analysis software programs. Specialized training may be needed to get the best use from the more complex application, but the information that is gained will be worth the time and effort. A good program can actually reduce costs by providing information about pricing, the timing of paying vendors, and the feasibility of making major purchases. Before deciding on a specific product, it may be helpful to download a free trial version to get an idea of what the program can do and whether it will meet the needs of the company. Several websites provide comparisons of a variety of programs and these can be helpful when making a decision on which one to purchase. Some software companies offer free updates as the products are improved. Additionally, potential customers should inquire about the costs associated with upgrading the cash flow analysis software program to support the changing needs of a growing business.

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