One very important ratio to follow

Guess what’s a very important ratio to follow in your everyday business? It’s not so much a ratio, but a number. It is equally important however and ensures you will not run out of funds to manage your business.

It’s your planned net cash flow. Obviously it should be positive, right? Well, if it is negative, there’s also the possibility it will turn black once you get a considerable receivable collected. 

Monitoring cash flows is something every respectable business, financial director, analyst and accountant does. When you’re not so much worried about your company’s liquidity position since you’ve always got funds, sure, you’re not supposed to do it regularly. However, when things get tight and especially when you’re going to encounter significant outflows in near future, you will understand the importance of planning inflows and outflows.

It’s something you’re supposed to do beforehand also. The importance is on the word “planning”. Becoming out of money is a result of bad planning. Sometimes it is inevitable, but then you should have a backup plan or it is in fact part of your initial planning.

Always, always monitor your money, where and when it moves.