The last few years have shown that companies that were unable to adapt quickly enough to crises had little chance on the market. To become more crisis-proof in the future, you should always keep an eye on your company's cash flow. Because in turbulent times in particular, what makes you optimistic today could jeopardize the economic existence of your company tomorrow.
What does cash flow mean?
The term cash flow is used as a business management indicator. It represents the difference between all cash inflows and outflows of a company in a financial year or other period. There can therefore be a positive or a negative cash flow. This key figure can be used to make statements about a company's liquidity.
What is a positive cash flow?
If a company earns more money than it spends, it has a positive cash flow. This indicates that the company is economically stable.
What is a negative cash flow?
If a company spends more money than it earns, it has a negative cash flow. This is not necessarily a negative sign, as this situation may have arisen due to high investments in new machinery, for example. However, if the negative cash flow persists over a longer period of time, the company may become insolvent.
The three types of cash flow:
Operating cash flow: This refers to what comes from a company's ongoing business activities, such as sales, costs for goods and services or wages.
Cash flow from investing activities: This key figure reflects the cash movements resulting from investing activities such as the purchase or sale of fixed assets or the purchase or sale of companies.
Cash flow from financing activities: This type of cash flow reflects cash movements resulting from the company's financing activities, such as payments received from shareholders, loans or bonds.
It is important for a company to know and monitor all types of cash flow. This is the only way to get a complete picture of your company's cash flow and obtain important information, for example to identify potential problems at an early stage.
Important cash flow facts
- Cash flow is the difference between a company's incoming and outgoing payments during a certain period, e.g. a financial year.
- There are three types: operating cash flow, cash flow from investing activities and cash flow from financing activities.
- Cash flow serves as an indicator of a company's economic situation and competitiveness.
What does cash flow monitoring mean?
The term cash flow monitoring refers to the monitoring of cash flow in a company. It is made up of the English terms cash flow and monitoring.
Cash flow monitoring involves monitoring incoming and outgoing financial transactions to ensure that a company has sufficient funds to meet its financial obligations and continue its business activities.
If cash flow monitoring is used effectively, it can help to identify and resolve potential financial bottlenecks at an early stage in order to avoid insolvency or other financial problems for your company.
Keeping track of all transactions between you and banks, customers or business partners, for example, is a laborious and resource-intensive process. That's why working with an experienced partner like nexnet is a great advantage. Because we keep you permanently informed about all money movements, their completeness, due date and correctness.
We can also use our payment clearing service to reconcile all financial transactions with the sales data from your online stores, marketplaces or offline sales channels.
What steps does cash flow monitoring involve?
The comprehensive cash flow monitoring process comprises several steps, which we have summarized here:
- The collection of data: First, information is collected on all incoming and outgoing funds, including sales, costs, investments and financing. The collected data can also be used to make predictions about future cash flows based on current business activities, projections and budgeting.
- Cash flow monitoring: In this step, all incoming and outgoing financial transactions are monitored. This ensures that all processes between the business partners run reliably. Deviations and problems during the transaction process can be identified at an early stage.
- Make any necessary adjustments: If deviations have occurred, adjustments can be made to the budget or business activities, for example, in order to improve your company's cash flow.
It is important for entrepreneurs to carry out cash flow monitoring on a regular basis. Because only those who have an up-to-date overview of their company's cash flow can guarantee and ensure that their company has sufficient funds to meet its financial obligations.
How can nexnet help you?
We at nexnet have been working in various industries with many customers for over 20 years and are very familiar with cash flow monitoring within financial management. With BI reports using Tableau, we can automatically monitor your cash flow in real time and make it accessible to you. These reports give you a quick overview of your cash flow. This allows you to plan the future of your company more effectively and with greater certainty.
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Our experts are highly trained and reliable. And your personal contact will work closely with you to find the optimum solution for your case.
