Frequently asked questions

  • Why are cash flow statements important to businesses?

    Cash flow is the money that moves in and out of a business. Staying on top of your cash flow is a vital part of running a successful business – and an accurate cash flow statement is a key tool for achieving this. You can use your cash flow statement to make sure your business has enough money coming in to pay off any debts and to fund day-to-day running expenses.

  • How often should you do a cash flow analysis?

    As a general rule of thumb, a rolling monthly cash flow statement should help you stay in control of your business’ performance. Ideally, you’d also have an idea of what your cash flow will look like over the next 12 months. That way, you can anticipate any potential problems and quickly nip them in the bud.

  • How can you solve cash flow problems?

    The solution to your cash flow problems will vary depending on what the exact sticking point is. There are some early warning signs you can look out for so you’re not surprised by cash flow problems. These warning signs include: relying too heavily on one particular client, lots of short-term debt and too much stock combined with flagging sales.

    To keep cash flowing in, you should send your invoices out quickly and with clear deadlines for payment. Use Square’s online invoicing tools to instantly send invoices and monitor payments. This makes it easy to keep track of what’s been paid and what’s still outstanding.

    Keep the customer’s journey as smooth as possible and ensure there are no sticking points standing in the way of accepting payment, whether through your online store or a physical point-of-sale.

  • What are the three types of cash flow?

    Cash flow from operating activities describes funds that contribute to the running of your business. These come from sales you’ve made. Cash from investing activities is the money spent on assets, such as equipment or loans. Finally, cash from financing activities covers money received from investors and banks.

  • What is the difference between cash flow and balance sheet?

    A balance sheet shows the summary of a company’s financial balances. It provided a snapshot of how much a business owns and owes at a particular moment in time. A cash flow statement, meanwhile, indicates changes in balance sheet accounts as well as income, giving a more overall picture of a company’s financial position.

  • How do you interpret a cash flow statement?

    Cash flow statements reveal what state and stage a business is in. That is, whether it’s just starting out, rapidly growing or a mature and already profitable organisation. It may also indicate that a company is in a period of transition or in steady or rapid decline. In the case of the latter, a cash flow statement can be analysed along with other financial reports to identify areas where the cash situation can be improved, e.g. through downsizing and cutting costs

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