Tag: Cashflow Management

How does Project Cash Flow help in Decision Making?

How does Project Cash Flow help in Decision Making?

Introduction

Company Finances and cash flow are the major components that help in tracking the overall performance, expenditure, and profits of a company. It is a compulsory task for every business, be it an SME, a startup, or a large enterprise. But there still are many organizations that are contemplating the question – How does Project Cash Flow help in decision making?

Looking after finances involves rigorous documentation and calculations. These components help in plotting the official graphs related to the cash inflow and outflow of a company. Maintaining track of this information is essential from many legal and administrative aspects.

In this article, we will talk about the definition of a Cash Flow Statement and its importance.

What is a Cash Flow Statement?

Companies maintain a financial report that documents the inflow and outflow of cash in a standard format, this format is known as the Cash Flow statement. It is an indicator of the company’s liquidity and therefore one of the most essential components when it comes to the financial management of a business.

Vital Information for Cash Flow Statement

Having information about a company’s income, expenses and budget allocations is important information required to prepare a cash flow. All this data is reserved in the accounting reports of a company and contributes to determining the current balance and future cash flow of the company.

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Negative Balance 

A negative balance indicates that the expenses were higher than the net income of the company.

Positive Balance

A positive balance indicates that the income period was higher than the expenses.

Significance of Cash Flow Statement in Decision Making

The cash flow statement of a company speaks of its present and prospects. It assists an enterprise in making decisions that comply with its financial state and its expected cash flow.

Given below are some of the points that explain how does Project Cash Flow help in decision making :

Emphasize creating revenues

Business revenues can be increased in many different ways. Multiple revenue sources stimulate the profits of a business and facilitate faster growth. With a well-maintained record of cash flow statements, companies can assess their overall performance and identify new ways of generating income. They can also enhance the functioning of the already existing methods to cultivate additional revenue.

Analyze business finance in a promising manner

Keeping a check on business finances is a vital task. It is equally rewarding as it helps you build a fool-proof plan for organizing and utilizing your finances. Protecting prompt cash flow details also helps the company gain the trust of its stakeholders. It increases their credibility and speaks for their management and organizational skills.

Cash Flow statements play a vital role in providing the budget outline for projects and other office requirements. This budget plan further allows the company to form a thorough blueprint of the finances and allocate them wisely. It prevents unwanted expenses and maximizes profit.

You may also like to read : Why is an Expense Management System Important?

Business Expansion

Managing a proper cash flow process helps the company understand its financial position and lead its expansion in a planned format. It gives them a precise direction that constantly guides them about the time and area where they can spend their capital and the amount of the capital they are entitled to spend.

Create a solid credit base

When you organize and document your business cash flow you prepare a well-detailed document that can prove the utilization of your finances. This builds a great business credit score. It puts you in a great position where you will be eligible to avail the credit whenever you are in need.

Simplify the accounting and audit Process

It is mandatory for companies to maintain accounting books. These books serve as legal documents, financial proofs, and reference material for the business. They help the company monitor its status and get an idea about the total debtors and creditors involved in a business.

Prompt accounting is also important for companies to deal with the audit process and comprehend their business activities. Software like Juntrax, provide automated assistance with tracking and calculating cash flow. It provides real-time information with flexible access to its cloud-based portal.

Inventory Planning

With a comprehensive knowledge of business cash flow, the company can maintain its inventory with a better strategy. This in turn increases the efficiency of internal proceedings and promotes smooth management and a profitable business process.

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Project Cash Flow Management

According to numerous researches evaluating the corporate field, over 49.5% of Project Managers face challenges in tracking the progress and budget of projects.

Juntrax Solutions can rescue you from this dilemma with the Project Planning & Cash Flow Management feature of Juntrax.

Juntrax can enable you to:
  • Create Projects, assign clients and mark budget in any currency
  • Organize tasks, allocate members, monitor cost centers, start and due dates
  • Fill the timesheet with hours spent on specific tasks.
  • Allow employee self-service to ease the burden on the manager
  • Discern comprehensive reports on Timesheet and Projects.
  •  Generate instant invoices

You can know more about our features by visiting our website and book a demo with our team.

Conclusion 

When cash flow statements are maintained in a professional manner, they assist in efficient planning for the financial management of a company. Prompt cash flow statements can transform the fate of a business and help it reach excellence.

There are many different ways in which companies administer, document, and handle cash flow statements. But in the current times of convenience and technology, automated software systems show up as the best option.

 

A Definitive Guide to Project Cash Flow Management

What is Project cash flow, anyway? Become a master with this comprehensive guide and watch your projects give net positive return always.

What is Project cash flow management , anyway? Become a master with this comprehensive guide and watch your projects give net positive return always.

Scope of project cashflow management

Do you ever struggle to cover your expenses at final sprints of projects because you don’t have enough cash? Understanding “what is Project cash flow?” is a great start.

If you answered yes to this question, you’re not alone. Many SMEs (small and medium scale enterprises) and startups experience the same problem: They suffer from poor Project cash flow caused by factors like poor planning, slow-paying clients, and not building contingencies and buffers.

But exactly what is Project cash flow management ? And why should you even care? In this post, you’ll learn nearly everything you need to know to help you become a master, including:

  • What it is
  • Why it matters
  • How to calculate it
  • How to track it
  • How to improve it

What Is Project Cash flow Management ?

To understand Project cash flow management , begin by learning what it isn’t. Firstly, it is not profit. Profit is the difference between revenue and expenses. It’s possible for a project to be unprofitable while having good Project cash flow and vice versa. This can happen, for example, when a business owner deposits the advance payments into a bank account, which improves the flow of cash but not profits.

So, what is Project cash flow?

It’s the total amount of money flowing in and out of your project. When more money is flowing in than out, you have positive Project cash flow and your business is in the green. Conversely, when more money is flowing out than in, you have negative Project cash flow and your business is in the red.

Project cash flow changes mainly result from operating & financing. When you are spending money on your project that is recorded as cash outflow, while any payment received from client or debtor is cash inflow

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Why Does Project CashFlow Management Matter?

Project Cash flow plays a crucial role in:

Keeping your project afloat and paying the bills that cover daily spendings to avoid the risk of shutting the project. Your goal is to maintain positive cash flow and ensure that at the end of the project you are always earning more than you’re spending.

Expanding your project scope to up-sell the deliverable goal and earn more. A project that’s increasing in scope will need extra cash to reinvest—to purchase new equipment, invest in hiring experts or project management professionals, extra working manpower, relationship building, and lobbying expenses, and so on—all while covering initially planned costs.

Making smarter project decisions by knowing that it is your cash flow that determines your decisions.

For example, let’s say that you plan on buying a concrete mixer and that at the end of the month you discover your income far outweighs your expenses. You can now confidently make that purchase to fuel the project scope expansion because you have enough cash. Conversely, if you’re in the red, you may choose to put that purchase on hold until your situation improves.

Lengthy projects have phases of slow and busy periods and unpredictable cash flow that changes all cyclically around the year.

Consistent cash flow management throughout the year is crucial for businesses to navigate slow periods effectively. Analyzing cash flow reveals how finances are managed and identifies areas impacting cash inflow and outflow. Understanding these nuances helps address financial challenges and ensure smoother operations.

How Do You Calculate ProjectCash Flow Management ?

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Calculating project cash flow usually involves preparing a cash flow statement that consists of the two core areas mentioned earlier:

  • Operations
  • Finance

Although you can calculate your cash flow for any period, it’s usually done monthly or weekly depending on the project length and complexity. There are two ways to prepare a cash flow statement: the indirect and direct method.

The Indirect Method

The indirect method is more straightforward and recommended for most business owners. Here, you adjust the net income from cash inflows against outflows.

The Direct Method

The direct method differs in one small detail: net cash flow from operating activities is calculated differently. Instead of adjusting your net income, you list the payments (expenses or outflows) and receipts (income or inflows).

Track Your Project CashFlow Management

Because changes in project cash flow often result from fluctuations in income and expenses, a good starting point is to monitor these two variables.

Tracking your income: it starts with tracking your invoices.

Track your invoices so that you know who has paid you, who hasn’t and how much money you’re earning each month. By tracking your invoices and keeping a secure record, you’ll also be better prepared for tax season.

Consider cloud accounting platforms like Juntrax or Zivabooks that store your invoices in one easily accessible place, provides you with at-a-glance overviews of your income and reminds you when any invoices are overdue (more on that in a bit).

Tracking your expenses: it starts with the right expense categories

You also need to maintain a firm grip on your expenses so you can compare them against income to determine profits. Here are two expense tracking best practices you may want to implement:

Organize business expenses into tax-friendly categories, so you understand your spending habits and can reduce your total tax bill. Typical business expense categories include office wages, supplies, bank fees, utilities, cell phone and data costs, travel and accommodation.

Upgrade your expense tracking methods. If you’re still recording expenses in spreadsheets or storing receipts in a filing cabinet, it may be time to upgrade to a more modern solution. Choose the right cloud software that will simplify your expense tracking by letting you:

Track the project billables against employee timesheets to prepare project cash flow report

Connect your bank account—say goodbye to manual entry

Generate invoices and purchase orders digitally and track payments along with sending payment reminders.

Mark an expense as billable, add a markup and pull it into an invoice to view at a glance how your business is performing thanks to expense, and profit & loss reports

The bottom line? Keeping tabs on your income and expenses helps you better understand the movement of cash and your spending habits. This understanding, in turn, improves your decision making

Conclusion

Cash flow is the lifeblood of your project whether business is consulting, enterprise or just a startup. It keeps your projects afloat; it helps you drive more mileage per project. Many SMEs realize the importance of managing project cash flow when it’s too late. With Juntrax, gain control over project cash flow from tracking to analytics, avoiding last-minute financial pitfalls.

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