Advantages of Preparing Cash Flow Statements
It thus becomes imperative for businesses to forecast the cash flows to ensure that the business has enough liquidity at all times. Impeccable management of cash flow directly improves the business’ financial security.
If the business has just started or is affected by the economy, proper Cash Flow Management is needed on a daily basis. If the business is established and profitable, then the statement can be prepared monthly.
The Main Advantages of Preparing Cash Flow Statements are:
- Potential shortfalls in cash balances should be identified in advance for any shortfalls. This would help a business to have seamless cash flow as well as plan ahead and be prepared for contingencies.
- Arrange for proper cash flow and plan in advance for payments that need to be made. On time payment.
- Try to identify clients with previous bad debts and try to devise ways to reduce the same.
- Preparing cash flow statements should be as important as preparing financial statements.
- Cash flow statements help get loans and financial help from banks and third parties.
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