Chapter 9: Cash Flow and Taxes

In my previous post, I spoke about a problem that many small business owners have. One of those problems was that many small business owners do not understand the value of a cash flow statement. The cash flow statement, in my opinion, is the most important statement. Given they are all necessary to keep a business running, the cash flow statement is what should be used day-to-day. The cash flow statement shows the amount of cash coming in, relative to the amount of cash going out. Your income statement can show a high net profit, but, until the money is actually paid to your business, that profit is not worth anything. There are situations where companies have had good net profits, but had to shut down because they had a horrible cash flow problem. That is why it is important to monitor the flow of cash in and out of your business. Make sure you maintain a level of cash that is enough for you to pay any bills or taxes that come due.