Financial Guide for SMEs - SME Corporation Malaysia

ChapterSix–Cash and ProfitCashYouropicFlow DriversBusinessManaging Cash FlowinCash Flow ForecastingCash flow is the lifeblood of everybusiness. A profitable business can stillsuffer from shortages in cash, so it isimportant to understand what “drives”y ou r cash flo wRemember that cash flow is all abouttiming and the flow of cash, so whenpreparing your cash flow forecast,make sure you are as accurate aspossible on the timing of the cashflowsinTiFinancial Guide for SMEsFinancial Guide for SMEsA business can be profitable but still have cash flow issues. It isimportant to implement procedures in your business that will ensurethat cash flow is appropriately managedT tH pCASH DOES NOT EQUAL PROFIT! The timing of when cash is received is the mostimportant issue when managing cash flowThe importance of knowing what are the keydrivers of your cash flow should not beunder-estimated. In order to maintain adequatecash flow, these drivers should be a priority foryour business and be well managedOnce the forecast is completed, you can run some“what if” scenarios to measure how reactive yourbusiness cash flows will be to certain changes inevents, such as decrease in sales or increase infuel costs. This will show you how quickly you mayrun out of cash if any of these events occur173160 173chapter 7-13 p79-181 Eng.indd 1738/15/11 5:03:11 PM