Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

SME - How to Take Control of your Cash Flow

Companies / SME Dec 23, 2015 - 02:07 PM GMT

By: Boris_Dzhingarov

Companies

If your business is concerned with investments or trading then there are a number of checks and balances you need to put in place in order to manage your cash flow. It’s well known that cash flow is one of the most vital and critical elements in the smooth running of a small or middle-sized business. If your enterprise is unable to manage cash effectively, you will be unable to invest in what your business needs and you may lose out. Check out this selection of things you need to have under your control:


Tracking

As cash flow is the movement of funds in and out of your business, you should ideally be tracking this on a weekly, monthly or quarterly basis, depending on the scale of your enterprise and your invoicing policy. You have to work at achieving a positive rather than a negative cash flow – it won’t happen all by itself. Analyse how your cash comes in and goes out and establish a framework, so that at the end of each financial cycle you know you have sufficient cash to cover financial commitments due the following period.

Good financial management

You can use accounting software packages designed for your size of operation that can help you produce cash flow statements so it’s easy to check progress regularly. You can also opt for a free invoice template that will not only give your business a professional identity but also ensure you bill clients regularly and get paid on time.

Growth is often considered as the solution to a cash flow issue, but beware of growing too much, too quickly, as small trading organisations and investment entrepreneurs can find that in the process cash flow problems also grow. It’s important to plan for growth in advance, as this encourages you to ensure you have a positive cash flow with sufficient funds to take care of your additional investments as you expand your operations.

Risk awareness

It’s worth bearing in mind that all investments carry some degree of risk, including bonds, exchange-traded funds, mutual funds and stocks. All of these can lose value if market conditions become difficult. Even if you are relatively risk-averse and opt for investments that are insured, such as certificates of deposit (CDs) that are issued by a credit union or a bank, these more conservative choices come with the risk that inflation might alter their value.

Average values over lengthy historic periods can be useful for guiding your decision-making about likely levels of risk. However, a particularly tricky aspect of controlling your cash flow, even if you hold investments in a wide portfolio of stocks for quite an extended length of time, is that you have no guarantee that the rate of return will be equivalent to your expectations.

This fact alone can make cash flow control difficult for investors. Beware of buying, for example, when a particular market is at a peak, as it is likely to then go into decline, swallowing your potential profits and perhaps resulting in a negative cash flow. Always take professional advice when considering new investments in untried markets.

Market and trading trends

Keeping an eye on expert advice can help when it comes to making investment decisions. For example, in terms of commodities, silver has been weaker than gold recently and indeed has had a long-term, seven year downward trend. Analysts, however, are starting to predict that the market may well rally before too long, so further investigation may well be useful if you are planning to bolster your enterprise’s cash position.

Currency trading has long been popular, especially among newer investors; commentators however have warned that there have been many surprises during 2015 and that investors should remain cautious. There was a short-term rally in the Euro/USD at the beginning of December 2015; analysts however predict that this is not likely to occur again for some time, so building an inflated price into your forex trading cash flow is probably not a good idea.

Much has been said and written about the housing market in London, and there is speculation that the current bubble will last until at least 2018. Reports suggest that even the professional middle classes are unable to afford London property prices, and some commentators advocate buying property in run-down cheap areas on the basis that they will be up and coming in future years. However, this might be a case of ‘buyer beware’ as there are also many empty and redundant buildings in London, and with this type of investment there is absolutely no guarantee of turning a quick profit, let alone achieving a positive cash flow.

Know your industry

In terms of general cash flow management, a little bit of common sense can go a long way. For example, retailers expect there will be a surge in sales before Christmas and during the January sales. In the same manner, if you are trading or investing in a particular area, you should be able to anticipate the highs and lows, and at the very least get some professional help to do so if you are a newcomer.

It also pays to anticipate ways in which you can improve cash flow. Negotiating payment dates with suppliers might help a business to pay in instalments or at a later date; this eases cash flow and helps you to predict your outgoings more accurately. In the same way, if you can minimise interest on borrowing you will move towards a stronger financial position, bit by bit.

Finally, as you begin to build your business, whether by adding to an investment portfolio or increasing your trading activities, track your income to establish if you are gaining a little more cash during each cash flow cycle. Always prepare for possible future shortfalls as part of your overall business strategy so that you are never faced with a situation where you don’t have sufficient funds to pay your creditors. If this happens, you are moving towards negative cash flow and you need to pay attention to that red flag.

By Boris Dzhingarov

© 2015 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in