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Why should cash flow be a problem if an entity is making a reasonable accounting profit and how can cash flow?


How can cash flow be made more favourable?

538 day(s) ago

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TaxesandScotch 		Many small companies could not survive if were not for "steady cash flow". Cash flows in from accounts recievable and out thru accounts payable, payroll, etc. A good and steady cash flow can carry you over poor periods in business and smooths out the bumps, it therefore saves you from lots of borrowing. Steady work thru good relations, diversification and a fair but firm accounts recievable person help keep cash flow favourable.

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DorthyP 		Cash is king.

A profit is different than cash flow. You may show a profit at the end of the year, but without cash flow during the year, no one will work for you - no subs, no employees. The government wants their taxes and your health insurance carrier wants its premiums. Your wife also wants that big screen TV because the neighbors got one.

Cash is king.

Cheers and good luck!

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brucechangcpa 		collect receivables faster and wait longer to pay accts payables

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tranglu 		By keeping capital expenditures within depreciation allowances,also the lowering of short term debt into long term liabilities.

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Question Title Why should cash flow be a problem if an entity is making a reasonable accounting profit and how can cash flow?
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