Drilling down into your cashflow and finances

Drilling down into your cashflow and finances

Cashflow is the ultimate measure of how a business is doing – and that makes cashflow a vital indicator for investors when analysing whether a company is making money, or losing money.

Before potential investors will consider putting funds into your business, they’ll want to know that the company is in good financial health. payday loans in Hillsboro OH no credit check In other words, they’ll want to see good revenues, solid accounts and a positive cashflow position – giving investors real security that they’ll see a healthy return on investment (ROI) from any funds they invest.

So with cashflow giving the clearest overview of business performance, it’s vital to provide banks, lenders and private investors the most detailed view possible of your cash.

What your cashflow statement shows investors

When approaching private investors, funding organisations or finance providers, it’s important that your business can provide the right level of financial reporting.

Your cashflow statement (or statement of cash flows) is key report for investors to review and analyse. By running a statement for a given period (whether that’s the past month, quarter or year) you can get a clear breakdown of the key areas of cash movement in the business.

  • Operating cashflow – this section of your cashflow statement shows the cash inflows and outflows that relate to the everyday running of the business. This is where investors can see what money you’re generating as income, and how much you’re spending on operating overheads, expenses and other related costs.
  • Investment cashflow – this is where investors will see cashflow from investments. This includes investments that are generating revenues from non-current assets (assets that won’t be turned to cash within the current accounting year), or securities that can’t be classed at cash equivalents.
  • Financing cashflow – this sections shows investors the flows of cash between the business and its owners and creditors. It’s where they’ll find numbers relating to borrowing funds, repaying debts, payments of dividends to your directors and capital that’s been brought into the business during the relevant period.
  • Net cashflow – the three preceding sections are brought together in the bottom line of your cashflow statement – giving a net cashflow number. The cash inflows and cash outflows are summed together so investors can quickly see whether the business is in a negative or positive cashflow position.

By analysing these cashflow numbers carefully, potential investors can see if the company is in a positive (or negative) cashflow position – and can use this metric as a key measure of whether you’re likely to be a good (or bad) investment.

Your operating cashflow data and net operating cash number will be of primary interest to investors and lenders – in other words, they’ll want to know how much income the company is generating, and how much cash is expended in order to create this income.

There are other elements of your financial reporting that investors will also want to drill down into, so they can factor these into a solid view of your overall financial health.

  • Working capital – this is the difference the company’s current assets (your cash, accounts receivable and inventory items) and your current liabilities (your accounts payable and other money you’re owed). High working capital provides the funds needed for the business to continue trading, growing and meeting its strategic goals.
  • Depreciation – your tangible assets will lose value over time, and depreciation applies a cost to this gradual reduction in value, giving you a more realistic view of their worth.
  • Amortisation – intangible assets (like any loans you’ve taken out) usually require regular repayments over time, and this must be factored into your financial overview.

Investors will generally engage a finance professional to review your accounts, business plan and cashflow statement, allowing them to quickly build up a view of the current value and growth potential of your business – and that’s vital when attracting the right investment.

Real-time data and smart cashflow forecasting

Looking at historic cashflow will help investors to understand your cash position in the past, but there’s real value to understanding your cash both in real-time and in future periods.

If your business is using the latest in online accounting, combined with cloud-based cashflow and reporting tools like Fluidly, the financial data that drives your cashflow statement can be seen in real-time – and that’s important.

Rather than investors knowing your net cashflow number from 3 months ago, it’s possible to deliver a cashflow report that’s 100% up to date, based on the current data in your accounts.

Using the smart cashflow engine of Fluidly, you can also move beyond the ‘now’ and produce cashflow forecasts and projections that show your future cash position – providing a more honest reflection of the current and potential financial status of the business.

Give investors a granular view of your cashflow

Fluidly’s smart cashflow reporting tools mean you can quickly provide investors with the real-time cash numbers and detailed financial breakdowns they will require.

When investors have real-time numbers and forecasts at their fingertips, you substantially increase your chances of accessing the required financial banking – and that’s vital for the future growth and prosperity of your business.

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