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Cash management methods are so critical in the business world! Understanding where your cash is going to and coming from is very important when conducting business. Cash flow statements are one of the most important statements used when managing your cash in a business. The income statement is also very important as it recognizes revenues and profits in the business. The balance sheet is another very helpful statement for a business as it gives a snapshot of the business's financial situation. A cash flow statement shows the cash going in and out of the business as well as what is left (the net result) over after a period of time. A cash flow statement shows how the cash came into the business as well as what it was spent on.

Comparing these described statements mentioned above can provide a better understanding for a business's financial situation even more. When an income statement may show high profits, but a cash flow statement shows low cash, it may be an indicator to look into where exactly your money is going. Is my money being spent the most efficient way? A cash flow statement can show where your money is going and what to look into.

Having too much cash in a business can be dangerous too. I have never thought about the issue of having too much cash in a business, but it can certainly have its problems. When raising capital by acquiring loans, and the cash not going to use can cost the business huge amounts of money in interest. In a situation where a business just has too much money sitting around, the money is not being put to use. When money sits and is not being used, it is simply loosing money. The business could instead utilize the money to update or expand their machinery or equipment. Investing the excess cash into a new project or property for business functions can also be a smart way to get the most out of the excess cash. The return on the cash is higher when it is invested back into the business rather than it sitting in the bank. I also feel that having to much cash around can lead to other problems. When a business has a huge amount of cash, then the business may not always make the most cost effective and efficient decisions. When a business does not have excess cash, I believe that they make better financial decisions.

With myself having to complete many of the different job functions as I am still in the startup phase, I have outsourced my financing operations which allows me to spend more time on expanding and growing my business. From having others develop these critical statements allows me to spend time on areas where I may provide more help. With developing these critical financial statements allows me to better situated my business and make the best financial decisions. I am able to recognize when I am able to expand my team as well as purchase new equipment with understanding the cash flow of my startup.

Comparing previous cash flow statements with more recent ones can also be a great way to manage cash. Understanding if the business is loosing cash and where the issue may be is extremely important. It also helps in understanding problem areas in where excess cash outflows. For example, if your vendor and supplier is requiring more and more cash, it may be an indicator to look for another supplier to compare prices. Cash is the heartbeat of a business. All businesses need cash to pay expenses such as vendors, taxes, and employees. If a business has no cash then it is not going to be open for very long.