Understanding the Cash Flow Cycle

As a small business owner, you've probably heard the phrase "cash is king," and it's true! But what does that really mean? It’s all about cash flow—the movement of money in and out of your business. A healthy cash flow cycle is the lifeblood of your company, and understanding it is crucial for making smart decisions.

The cash flow cycle can be broken down into three main activities:

• Operating Activities: This is the cash generated from your day-to-day business operations. It includes money from sales, but also outflows for expenses like rent, salaries, and inventory.

• Investing Activities: This involves buying and selling long-term assets, such as equipment, vehicles, or even another company. These are big-picture moves that impact your business's future.

• Financing Activities: This relates to how you raise capital. It includes getting a loan, selling stock, or making loan payments. This is about managing your debt and equity.

Keeping a close eye on your cash flow helps you anticipate shortages and surpluses. It allows you to plan for growth, manage debt, and ensure you have enough money to cover your expenses. Don't just look at profit; pay attention to the cash!

As always, if I can be of any help, please reach out to me at; mdaviscpb@qbocleanups.com.