About
About Us
Leadership Team
Annual Report
Mutual Growth Podcast
Impact Report
Resources
Knowledge Center
Financial Calculators
Financial Quizzes
Security Center
Contact Us
Careers
Find a Branch Near You
215.788.1234
Find a Branch
215.788.1234
site logo
  • Personal
    • Bank
      • Checking
      • Savings & Money Market
    • Borrow
      • Credit Cards
      • Home Equity Loans & Lines of Credit
      • Home Mortgages
      • Personal Loans
      • Meet The Team
      • Apply for a Loan
    • Manage
      • Online Banking
      • Mobile Banking
      • Visa Debit Cards
      • Your Credit Score
      • Credit Cards
      • Zelle® Complete
      • Safe Deposit Boxes
    • Personal Banking Rates
    • Financial Calculators
  • Small Business
    • Bank
      • Checking
      • Savings & Money Market
    • Borrow
    • Manage
      • Cash Management
      • Merchant Services
    • Meet The Team
    • Industries
    • Resources
  • Commercial
    • Bank
      • Checking
      • Savings & Money Market
    • Borrow
    • Manage
      • Cash Management
      • Merchant Services
    • Meet The Team
    • Industries
    • Resources
  • How We Grow Communities
    • Community Commitment
    • Penn Community Foundation
    • Community News
  • Log in
site logo
  • Log In
  • Personal
    • Bank
    • Checking
    • Savings & Money Market
    • Borrow
    • Manage
    • Personal Banking Rates
    • Financial Calculators
  • Small Business
    • Bank
    • Checking
    • Savings & Money Market
    • Borrow
    • Manage
    • Meet The Team
    • Industries
    • Resources
  • Commercial
    • Bank
    • Checking
    • Savings & Money Market
    • Borrow
    • Cash Management
    • Merchant Services
    • Meet The Team
    • Industries
    • Resources
  • Communities
    • Community Commitment
    • Penn Community Foundation
    • Community News
  • About
    • About Us
    • Leadership Team
    • Careers
    • Annual Report
    • Mutual Growth Podcast
    • Impact Report
  • Resources
    • Knowledge Center
    • Financial Calculators
    • Financial Quizzes
    • Security Center
  • Contact Us
Careers
Find a Branch Near You
215.788.1234

Managing Cash Flow

Cash flow is the lifeblood of most businesses. In the ideal world, it circulates smoothly. Customers pay their bills regularly which builds positive cash balances in your books. This cash is the money used to pay your suppliers, employees, and to fund your growth. That in turn, keeps your customers buying and paying.

However, there are many twists and turns with the cash flow process. That is why it is important to know how to utilize it best to keep your business solvent and thriving.

Basics of Cash Flow and Definitions

It is helpful to understand the terms used when accountants, bankers, and business owners talk about the cash flow process.

  • Cash flow: Quite simply, this is the way funds move in and out of your company.
  • Negative cash flow: This occurs when the cash outflow is greater than that coming in. This typically represents an unsatisfactory situation for any business.
  • Positive cash flow: This occurs when cash inflows from sales, accounts receivables, or other sources are greater than cash outflows from salaries, accounts payable, or other expenses. This is a healthy situation for any business.
  • Inflow: The movement of funds in to your cash account, usually from sales and accounts receivable.
  • Outflow: The movement of funds out of your accounts, usually from payroll, accounts payable, and overhead.
  • Cash flow analysis: A process of monitoring expenses and incoming funds to ensure your business has enough cash on hand each month to keep your company operating.
  • Profit: At the most basic level, profit equals revenue minus expenses.
  • Cash flow gap: When you need more money for current expenses than you have on hand, you have a cash flow gap.
  • Successful cash flow management: Keeping cash coming in on a steady, reliable basis, while delaying outflows as long as you can.
  • Cash flow worksheet: Represents a way to track your cash flow. Quickbooks and other accounting software make it an easy step-by-step process to put together a cash flow statement.

Comparison of Cash Flow to Profit

Profit is different from cash flow. You may realize a healthy profit at year end, yet face an unhealthy cash flow at various times of the year. Understanding your business finances is not as simple as just looking at a profit and loss statement.

Fundamentally, profit is simply your revenues minus your expenses. However, cash flow depends on a broad range of factors including:

  • Accounts receivable
  • Inventory
  • Accounts payable
  • Capital expenditures
  • Debt service

In essence, profit refers to income and expenses at a point in time. It is static in this regard. On the other hand, cash flow is dynamic. It involves the timing of the movement of money in and out of the business.

Tips to Improve Cash Flow

A healthy cash flow is an integral part of any successful business. Implement these suggestions as applicable to help you manage and improve the cash flow of your business.

  • Collect your receivables in a timely manner. Consider using a lockbox from a bank or credit union, to process payments more quickly. Offer discounts for quick payment. Suggest customers use depository transfer or pre-authorized checks.
  • Tighten the credit you offer. Research your customers, don’t offer credit to everyone. Ask them to fill out a credit application. Take credit cards.
  • Increase your sales. Run a promotion to attract new customers. Offer additional products or services to your current list.
  • Apply for a short-term loan if needed.
  • Don’t pay all your bills at once. Space them out, according to projected cash flow throughout the month.
  • Pay with the cash you have on hand, not on expected sales.
  • Don’t use sales tax to pay other bills. This can backfire.
  • Consider using a payroll service. They know how to collect and pay payroll taxes, simplifying your business accounting.
  • Build a relationship with a bank, credit union, or reputable credit company that provides working capital. Do this before any cash flow gap happens.

Remember, cash flow is the heartbeat of any business, large or small. Monitor it regularly, and do what it takes to keep a smooth flow of money circulating through your company.

Posted on April 30, 2019July 16, 2021Author Penn Community BankCategories Business Banking

Post navigation

← Creating an Online Presence
Establishing Credit →

Search

Recent Posts

  • Celebrating the Career of Diane Brown
  • Reflections During Women’s History Month
  • Daylight Savings: Spring Savings Tips
  • Protect Your Accounts by Avoiding Phishing Scams
  • Celebrating International Women’s Day

Categories

  • Business Banking
  • COVID-19
  • DE&I
  • Digital Banking
  • Economic forecast
  • Financial Literacy
  • General
  • Personal Banking
  • Podcast
  • Residential Lending
  • Security

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • November 2018
  • October 2018
  • August 2018
To give you the best possible experience, this site uses cookies and by continuing to use the site you agree that we can save them on your device.
Accept
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT

215.788.1234 Find a Branch Near You

Personal Bank Borrow Manage Personal Banking Rates Financial Calculators
Small Business Bank Borrow Manage Meet The Team Industries Resources
Commercial Bank Borrow Manage Meet The Team Industries Resources
How We Grow Communities Community Commitment Penn Community Foundation Community News
Security Center Privacy Policy
Accessibility Statement Site Map

US Routing Number: 231373182 
|  Penn Community Bank NMLS #: 434939

© 2023 Penn Community Bank. All Rights Reserved