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How Cash-Flow Projections Can Help Grow Your Business

Cash inflow is the lifeline of your start-up business and it comes from various sources such as receipt of a loan, interest on savings, payments from customers, monetary infusion from an investor, and investments.

Cash inflow is the lifeline of your start-up business and it comes from various sources such as receipt of a loan, interest on savings, payments from customers, monetary infusion from an investor, and investments. Cash is essential for running your business as you get payment option for various expenses such as stocking raw materials, salary of employees, office rent and other operating expenditure. In fact, positive cash flow is good as it indicates that your business is running smoothly. Also, when it occurs in large amount, cash flow is better as it will permit you to do other investments such as hire new employees or open branch on other location and helps in growing your business further.

Understanding Your Cash Flow

Typically, cash transfer in and out of your start-up business can be put in order into following three categories:

· Operating cash flow: Cash associated with everyday operations of your start-up business like gathering from clients and paying expenses

· Investing cash flow: Cash associated with the sale or purchase property, plant, equipment

· Financing cash flow: Cash transfer in and out to investors such as loans, line of credit as well as equity

All these categories and cash usage can be coupled to provide a detailed picture of how cash flow varies time to time. This variation can give you clear picture of how much amount of cash your business actually has. This information will not only help you in understanding the current and past cash flow but also in projecting your future needs.

Projecting Your Cash Flow

Typically, the cash flow projections are driven by your operating cash flow. Ideally, operating cash flow is being projected either weekly or monthly for determining whether you need support from funding activities. As investing activities are designed on this basis for several businesses. Until and unless you are not in a progressive growth phase that needs purchase of assets, you will not have enough cash for further investments. As this tends to be larger transactions, they have considerable impact on cash flow of your business.

Usually, it has been observed that financing activities refer as plug in the model of your business cash-flow. Any insufficiency in investing or operating cash flow can be covered with money from various financing activities. As it takes time in finding potential lenders or investors in getting cash, it’s better to know in advance how much and from where your business will get funding for balancing its cash flow.

Cash-Flow Tips

Cash flow depends totally on time. Specifically, when a transaction takes place, you don't feel its impact immediately. While projecting the cash flow of your business, do consider the following things:

Be Conservative

Vendors want that the customers pay early but customers mostly pay late. Usually, it does not happen the other way around. It can be essential to create assumptions considering negative cash flow for ensuring that you have enough credit for covering that cash shortage.

Include a Minimum Cash Balance

While projecting cash flow of business, always remember that one will never complete month with negative cash flow. If the cash flow you are operating with is negative, then you can consider compensating all the way through asset sale or by borrowing cash.

Moreover, management of cash flow is critical for your business and considering your business expenses allow you to plan for future expenditure and know the projected profit from that business which in turn will help in managing your cash flow.



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ALCOR M&A, the investment bank, is promoted by a group of Harvard Graduates and is made up of representative Directors of ALCOR group companies from all the major geographic regions ALCOR operates in. ALCOR M&A is owned by ALCOR Fund, which has 14 major portfolios across the world and more than minority investments. ALCOR M&A is well networked with access to more than 1500 funds and financial institutions globally and has a dynamic database of 35,000 global companies seeking alliances and ventures across borders. ALCOR's strengths lie in combining the strategic growth understanding with market expertise and applying these with absolute commitment to the growth and successes of its clients.

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