As a small business, you might wonder whether you need a cash flow analysis, or you might not know what one is at all. If the latter is true, this is to be expected! Unless you’ve performed a cash flow analysis before, you’re not to know what they are or how they work.
In this article, you’ll learn what a cash flow analysis is, why they’re important and how to perform one.
What is a cash flow analysis?
Cash flow simply refers to how much money comes into your business, and how much goes back out again, over a specific timeframe. A cash flow analysis digs into your cash flow statement and measures your cash flow, enabling you to:
- compare with benchmarks and previous cash flow statements
- understand where your money is going and where it is coming from
- create a plan or strategy for improving your cash flow.