August-07-10

Operating Cash Flow

I am very proud to announce the long awaited and greatly anticipated Devine Bookkeeping Blog! I can’t wait to share with you my many successes and milestones achieved over the last few years. But for my very first blog, I want to talk about Operating Cash Flow (OCF), it may sound insignificant or even boring, but I can tell you it is the number one thing a bank will ask for when you go to them for help on growing your business.

Have you ever heard the saying - Cash is King, well it is so important because without cash a business cannot survive very long. It is much more fun to analyze your net earnings, but what owners fail to notice is their operating cash flow. You could be earning plenty of revenue, however if more cash is flowing out of the business then in, your business could be suffering greatly.

What could affect that – maybe your Account Receivable is not being collected in a timely fashion, you have past liabilities that are being paid down, such as back taxes or a loan, or your expenses are more than your revenue that is being generated. There are a number of potential reasons your OCF could be suffering.

The statement of cash flows is not an exact science but it is a powerful tool that will help potential investors or owners get a handle on whether a company is burning cash faster than they are taking it in. You are looking for positive numbers or some reason why the numbers are temporarily in the negative. So all the best with your cash flow, and if you need help, you know who to call – Devine Bookkeeping, visit our contact page for more details. Stay tuned for our next post – The HST debate.

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