Running a small business successfully requires that you know where you stand financially at any point in time. You need to have solid projections for future expenses and income, and you need a clear picture of how much available cash you have on hand. A cash flow analysis gives you the current and accurate information about your assets and liabilities that will help you plan for a successful business.
The first thing that’s helpful to know is the meaning of these terms, when you are reviewing your assets and liabilities and generating a cash flow analysis. An asset is something that your company owns that holds value. It can be inventory or equipment, but it can also be a nonphysical asset such as a trademark or patent.
Your company’s current assets are the sum of cash and cash equivalents that can be converted to cash in less than one year. Examples of current assets include inventory, accounts receivable, prepaid expenses, and marketable securities.
Liabilities are the obligations that your business owes to suppliers, vendors, and lenders. Your current liabilities include the sum of all money your company owes that is due with one year.
Your cash flow statement shows the timing of all cash going in and out of your business during a specific period of time. You can use the statement to better understand your cash position, which is the amount of cash you have available for use in your business.
A cash flow statement measures how well your business manages its cash position. To run a successful business, you will need to understand how well the company generates cash to pay its debts and fund its operating expenses. The main components of the statement are cash from operating activities, investing activities, and financing activities.
To use the Cash Flow Statement:
The result is your cash position. Reviewing this information on a regular basis gives you a better picture of your cash flow.
Running short of cash is one of the most common causes of failure for a small business. When you conduct a cash flow analysis on a regular basis, such as monthly, you will know what your cash position is at any point in time. The cash flow analysis gives you a clear picture of your company’s financial health. When you find concerns, you can take steps to resolve them to keep your business financially solvent and successful.
Regular performing a cash flow analysis is key to knowing whether you have enough cash on hand to make payroll, pay suppliers, buy materials, or move forward with expansion plans. One thing to keep in mind while analyzing your cash position is to understand that a lot of cash on hand doesn’t necessarily translate to being a profitable business. Along the same lines, even though you may have strong profit margins, you will still need available cash to pay your bills.
As you perform the cash flow analysis on a regular basis, you will begin to see patterns in your cash flow. If you find that you are running short of cash at certain points of time, you can use that information to look for ways to cut costs or increase your income. You may even need to consider short-term financing to cover your immediate debts. On the other hand, if you have extra cash, you might consider investing or putting it aside to cover expenses during anticipated future slow periods in your business operations.
Maintaining and interpreting your company’s financial information is critical for making sound business decisions. The professionals at Clear View understand what it takes to maintain accurate, helpful financial records. We will work with you to help ensure your financial records are in good shape so you can better understand your current status and plan for a successful future. Learn more about how we can help you and your business by contacting Clear View Business Solutions to speak to our team about our services. Give us a call at (520) 544-0177.
At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there.
Northwest Location:
7530 N. La Cholla Blvd., Tucson, AZ 85741
Central Location:
2929 N Campbell Avenue, Tucson, AZ 85719
© 2025 Clear View Business Solutions. All Rights Reserved.
At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there. With over 20 years of experience serving hundreds of business owners like you, our team of experts combines financial expertise and proactive communication with our drive to help each client achieve results and have fun along the way.
Here's how we do it:
Discover: We start with a consultation to understand your specific goals, what's holding you back, and what success looks like for you.
Strategize & Optimize: Together, we design a customized strategy that empowers you to progress toward your goals, and we optimize our communication as partners.
Thrive: You enjoy a clear view of your business and your financial prosperity.
Schedule a consultation today, and take the first step toward being able to focus on your core business again without wondering if your numbers are right- or what they mean to your business.
In the meantime, download, "The Business Owner's Essential Guide to Tax Deductions" and make sure you aren't leaving money on the table.
