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What Is Positive and Negative Cash Flow and How Does It Affect a Business?

What Is Positive and Negative Cash Flow and How Does It Affect a Business?

As a business owner, it is crucial to understand cash flow and how it can affect your business and your profit. 

We implore you to work with a qualified virtual Chief Financial Officer (vCFO) who can help you determine what practical steps should be taken to reach your business goal. In the world of business finances, a cash flow report can make or break a business, and is one of the reasons your vCFO will be an indispensable part of your team.

Determining the Quality of Your Cash Flow

Cash flow can be either positive or negative. 

When your business account is receiving more cash than it is paying out, you will have a positive cash flow result. This usually means that your company is receiving more money in sales of products or services than it is spending on business expenses or anything else, which results in a good, positive cash flow. The remaining money after business expenses is your profit. 

However, if expenses for payroll, maintenance, rent, and other services are exceeding the flow of money being made, you will start losing money, resulting in negative cash flow.

How Does Your Cash Flow Affect Your Decision Making?

Positive cash flow is the foundation of a solid business. Positive cash flow can pay for expansions in operational capability and help you to recognize when targeted profit goals are within reach. 

However, negative cash flows can also be a necessary part of life for every business, especially during start-up and periods of rapid expansion. Cash flow reporting during these times will help you determine if your business finances will remain strong enough to last until the expected revenue increases finally appear and bring your cash flow back into the positive.

Your cash flow ultimately determines if you have the means to expand, maintain, or upgrade your business.

Planning for Future Growth

Cash Flow Report is an important tool for your vCFO’s; it can be used to determine which investments have the best chance of resulting in future revenue gains without putting the business at risk of bankruptcy.

Your virtual CFO will be an architect designing the profitable business you have always envisioned.

Hiring a vCFO Can Assist in Succeeding in Your Business Plan

The Virtual Chief Financial Officers at Gonzalez and Arrambide, Inc. in Weslaco can help you maintain a profitable cash flow for your business. We strongly suggest learning about cash flow and how it affects your business.