THE IMPORTANCE OF CASH FLOW MANAGEMENT

The sustainable growth of a company requires, in addition to organization, the adoption of various control and management practices and tools, such as Strategic Planning, Business Budget, Board of Directors, Shareholder Agreement, etc. In addition to the various Corporate Governance practices, covered in articles on the topics BUSINESS BUDGET, STRATEGIC PLANNING, BOARD OF DIRECTORS and PARTNERS' AGREEMENT, there are simple tools and practices, used on a daily basis, that are essential to monitor the health and financial performance of a company, such as Cash Flow. In a practical way, Cash Flow can be explained as a financial management tool that aims to monitor and control the financial balances and the flow of inflows and outflows of resources of a company. Used to assist in financial planning and decision-making, Cash Flow is considered, by many specialists, to main tool for determining the financial health of any business over a given period of time. It allows managers and partners to analyze possible resource collection or allocation needs, making it easier to identify deviations and their causes. In addition to allowing the monitoring of past cash performance, the tool must also be used predictively, allowing managers and partners to analyze a company's future cash generation according to assumptions stipulated by them, generally in accordance with the Annual Budget. Although the projections can be made on a monthly, quarterly, biannual or annual basis, it is essential to follow the daily Cash Flow projection because a given monthly period may have positive balances, but the daily analysis may present frequent negative balances, compromising the company's operation. For efficient results, frequent monitoring of Cash Flow is essential. The monthly comparison and analysis between the Budget and Realized is common, making it possible to identify important deviations in advance, in order to guarantee optimization and efficiency in the allocation of resources. To use the Cash Flow, the following information is necessary:

• Initial balance a Resources available for use (Ex: Bank Balance, Cash, etc.)
• Inputs a) Resources derived from the sale of products or services, contributions from partners, raising financing, sale of fixed assets, etc.
• Outputs a Costs and Expenses incurred during the operation (Ex: Suppliers, Wages, Tax Payment, Bank Depreciations, CAPEX, etc.).
• Final Balance a Result obtained by the following equation: Initial balance + Inputs - Outputs

An efficient Cash Flow must cover the metrics mentioned above, but also the company's Annual Budget, helping partners with short, medium and long-term decisions. After preparing the Cash Flow, there are different analyses that can be performed, such as the segregation between the Operating Cash Flow and the Financial Cash Flow.Operating Cash Flow a Demonstrates the generation of cash, over a certain period of time, considering only the movements necessary for the company's operation (Ex: Revenue from the sale of products and expenses related to Suppliers).Financial Cash Flow to It demonstrates the generation of cash in financial events that do not cover the company's operation (Ex: Funding Collection, shareholder contributions, Bank Depreciations and CAPEX). It is common to have companies that have a healthy Operating Cash Flow, but when adding Financial Cash Flow, the business presents serious difficulties due, for example, to the high degree of registered indebtedness. Below is a fictitious example of Cash Flow projected for the month of February.

Results with a higher degree of assertiveness, efficient decision-making and anticipation are some of the advantages provided by Cash Flow. Knowing, using, and monitoring this tool frequently allows partners to identify future problems, making it possible to seek, in advance, ways to refinance the business and have sustainable financial control. The lack of financial control is a direct result of the lack of knowledge or lack of monitoring of Cash Flow. Ignoring this important tool means giving up the company's financial health.ARTICLE WRITTEN BY PEDRO FENATI — PARTNER OF FC PARTNERSGo to our site: http://www.fcpartners.com.br