In households today, this same philosophy can be hugely beneficial and it is pleasantly surprising how naturally it becomes to reduce both core and discretionary expenditure. In business this normally applies to cutting out inefficiencies, bad practice and waste reduction. There is a business philosophy which says ‘what you measure improves’. Once you drill down into your household finances, measuring and controlling becomes infinitely easier.
![importance of cashflow importance of cashflow](https://www.investopedia.com/thmb/1sLVUm2GA-5WwSf9FB0hRzZ_A_c=/6251x4668/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Corporate_Cash_Flow_Understanding_the_Essentials_Oct_2020-01-3c5fb3c82fb240c0bad19e14f04ce874.jpg)
I will concentrate here on private individuals’ financial planning needs. The main reasons for doing so differ in detail between business and the individual however the fundamental principles remain the same. These are the obvious questions, but why don’t business and individuals engrain this habit more in their business and private financial plans?Ĭash flow planning and forecasting is key to lowering financial stress. Why plan your cash flow? What are the main benefits of cash flow planning? Most of us have some form of spreadsheet in operation around the household finances, which demonstrates that most of us see some benefit in the habit. If a business or person does not have enough cash to support its operations, it is said to be insolvent, and a likely candidate for bankruptcy should the insolvency continue. Having ample cash on hand will ensure that creditors, employees and others can be paid on time. Cash flow is crucial to an entity’s survival. They can be presented as a record of something that has happened in the past, such as the sale of a particular product, or forecasted into the future, representing what a business or a person expects to take in and to spend. In business as in personal finance, cash flows are essential to solvency. I thought it would be useful to begin this piece with a reminder of what a trusted definition of cash flow is:.
![importance of cashflow importance of cashflow](https://1.bp.blogspot.com/-zXYIgdGSraM/XwrZIsvm4KI/AAAAAAAAV3A/P76F1Ufl_CkAZvjh902QEvciw2bTiswUQCLcBGAsYHQ/w1200-h630-p-k-no-nu/the-importance-of-cash-flow-management.png)
There are copious amounts of great material on Investopedia, a most useful resource on the world of finance. Case Study 2 – Normal retirement age approaching for Executive Director.Case Study 6 – Choosing a Personal Retirement Bond when moving employments.Case Study 5 – Homeloan young couple new home purchase.Case Study 4 – Wealth protection for retired couple.Case Study 3 – Young couple inadequate protection in place for death/illness.Case Study 1 – Protection for middle age couple with children.
![importance of cashflow importance of cashflow](https://fullyaccountable.com/wp-content/uploads/2021/01/cash-flow-management.png)