Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsAs mentioned earlier, the statement of cash fl ows can be a useful tool tomeasure the fi nancial health of a business and can provide helpful warningsignals. Three potential warning signs which, in combination, can indicate thepotential for a business failure are:• Cash receipts are less than cash payments (i.e. you are running out of money);• Net operating cash flow is an “outflow” i.e. it is negative; and• Net operating cash flow is less than profit after tax (i.e. you are spending morethan you earn).TIPUse the Cash Flow Statement to analyse if you are spending more thanyou are earning or drawing out too much cash from the business20chapter 1 01-21 Eng.indd 208/15/11 5:01:25 PM