The Importance of Understanding Cash Flow Reports for Business Owners

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Every business owner knows that cash is king, making cash flow reports one of the “Big 3” of financial reporting. However, simply producing a monthly cash flow statement is not enough. The recipient must understand it and be able to make actionable recommendations. In a study by Harvard Business Review, 86% of respondents said that the ability to extract new value and insights from existing data and analytics was crucial. Clients want to know how to read their cash flow reports and use the information to improve their business’s financial health.

Once clients understand their cash flow reports, they can make informed decisions to improve their company’s bottom line. Accounts receivable is a critical area to address when dealing with cash flow issues. Standardizing the sales process, making it easy to receive payments, and dealing with delinquent accounts can help streamline the accounts receivable process.

Accounts payable is also an area where savings can be found. Reviewing vendor contracts and timing payments correctly can make a big difference. Negotiating prices, pre-payment discounts, and bulk discounts can also help keep costs down.

Analyzing spending and costs is another key area where improvements can be made. By asking if a cost is necessary, if there is a better price available, and if there is a more efficient way, clients can determine what can be eliminated, made less expensive, or done better. Checking inventory levels is also crucial, as carrying too much inventory can be a cash flow killer.

When clients understand their cash flow statement, they become empowered to make decisions for their company’s financial health. Reach Reporting provides an easy and affordable way to build financial reports that clients will love. Check out our demo or 14-day free trial to learn more.

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