The key for corporate finance is the business cash flow - First it´s important to start from scratch. Note: this article is intended for Non-Financial Business Owners / Founders
Juan Pablo Morales
March 31, 2021
What is Cash Flow?
Cash Flow (CF) is the amount of money on an organization, increase and/or decrease. Normally, we measure the cash generated and consumed in a specific interval of time, with that track there´s a chance to analyze the historic periods, the status quo as well as forecast the flow behavior for the next periods.
Normally, businesses are run without considering the liquidity business have, and that is a huge mistake. Just to point out an analogy, is like riding a horse blind and without hands, you will never know what´s next in the horse´s path! Sounds crazy… but it´s completely true.
Business owners should be cash flow driven. Checking and controlling the liquidity it´s the key to manage the operations correctly. Please review these scenarios that support my thesis:
Profit is positive, but the receivable turnover is superior to 120 days. That means on average a customer takes almost 4 months to pay. The lack of cash will force the company to increase their liabilities or run off chances to pull out a credit.
Profit is negative, but the forecast suggests that in 6 months the business will be in break-even. It´s important to analysis if there´s a way to cover the operation within this period.
“We were always focused on our profit and loss statement. But cash flow was not a regularly discussed topic. It was as if we were driving along, watching only the speedometer, when in fact we were running out of gas”- Michael Dell
What is OPEX? One of the cash flow components
The operational expenditures (expenses) are all the business needs to run correctly.
The OPEX might and should be and input for the cash flow, so once your domain and control the OPEX the cash flow will be easy to forecast and analyze.
Lastly, here are some interesting tips about cash flow:
CF is considered the key to corporate finances.
Life should be easier if you forecast the cash flow behavior (at least for the next 2 -3 months).
PLEASE always analyze worst case scenarios with your CF, to protect your business operations.
When forecasting the CF, always be conservative
Pay debts earlier.
Assume delays on receivables.
Assume investments will have a significant lower return than expected.
Always ask the questions:
How could I obtain resources for my business? In good times as well as on a crisis.
Which are the correct investments for the long term of my business?
How do I manage properly my cash in the short term, avoiding problems with obligations?
“Making more money will not solve your problems if cash flow management is your problem.” – Robert Kiyosaki
For your business, please DO NOT:
Be positive predicting your incomes, what if the expected income enters a month later? How you will be able to meet the operations requirements?
Underestimate the expenses, specially the OPEX. It´s important to measure on a weekly basis the costs and execute a proper forecast for every single expense line.
Increase liabilities/assets ratio in good times, what if there´s a crisis and you require financing?
Forget to evaluate and maintain your possible financing streams, the key is to always have the “hammer” to break the in case of emergency window.
Related posts
May 23, 2023
Software Development
How does Chat GPT improve productivity in software development?
Do you know howChat GPT is revolutionizing software development and boosting the productivity of development teams? In this blog, we will explore how this advanced technology can efficiently improve the software development process and overcome the challenges it faces.
May 22, 2023
Software Development
Artificial intelligence and the impact on software development
Artificial intelligence (AI) has emerged as a disruptive technology that is changing the way software is developed. AI refers to the ability of machines to learn, reason, and make decisions in ways similar to humans. This technology has infiltrated various areas of our lives and has found fertile ground in software development.
May 15, 2023
Tips
The best websites to find 100% remote work 2023
Remote work has become a trend all over the world. It offers the freedom to work from anywhere and saves costs for companies. In this blog, we present you with a list of the best platforms to find remote work in 2023 and some advantages and disadvantages.
May 1, 2023
Technology
FEMTECH 2023: Women in Technology Hackathon
Our 2nd edition was a complete success and 40 participants, including programmers and designers, created digital products of great value for society. We tell you all the details in this blog.
March 28, 2023
Software Development
From plant manager to IT project manager
Find out how Diego Baquero became a successful IT Project Manager after working in the manufacturing sector. Learn about his challenges, experience, and why he recommends working at Imagine Apps.
March 27, 2023
Technology
Multi-platform software development: What is it and why is it important?
Are you interested in developing multi-platform software but don't know where to start? In this blog, we'll tell you everything you need to know, from its definition to its advantages and disadvantages, to the tools and technologies most commonly used in this field.
March 24, 2023
Technology
How to Estimate Software Development Time: 6 Key Factors
Wondering how long it will take to develop your software? Estimating time is crucial for project planning and budgeting. In this blog, you will discover the 6 key factors to consider when estimating software development time.
March 17, 2023
Technology
Why Requirements are Essential for Software Development: 7 Key Reasons
Why are requirements so important in software and application development? Discover the 7 key reasons in our latest blog and learn how requirements are essential for your project's success and how they can help you avoid long-term problems. Keep reading to find out more.
March 15, 2023
Technology
Imagine Apps prepares for Startco 2023
Imagine Apps will participate for the second consecutive year in Startco 2023, the platform for entrepreneurship and technological innovation that offers resources and tools to drive businesses. Learn how this participation can help you and your company grow in the technological field.
February 8, 2023
Software Development
Low Code vs No Code: ¿What are the Differences and Benefits for Businesses?
Are you looking for a more efficient way to develop applications? Are you confused about which technology to choose: Low Code or No Code? In our blog, we explore the key differences and benefits.
February 7, 2023
Software Development
Hiring Dedicated Teams vs Staff Augmentation: What to Choose for Your Project
Confused about choosing between dedicated teams and staff augmentation for your software project? Read our blog to make an informed decision with a clear comparison of pros, cons and key factors to consider. Get the best solution for your needs and ensure project success.
January 23, 2023
Software Development
How to choose a programming language for a project?
Confused about which programming language to choose for your next project? Our blog provides a comprehensive guide on how to evaluate the pros and cons of popular languages and make the best decision for your specific project goals and needs.
January 21, 2023
Software Development
Why you should do UX research for your software project?
If you're developing a software product, you can't afford to skip user experience (UX) research. It's an essential step in understanding user needs, improving usability, and increasing user satisfaction. In this blog post, we'll explore the reasons why you should do UX research for your software project and how it can benefit you.
January 20, 2023
Software Development
Agile vs. waterfall methodology
Do you want to know about the different approaches to managing software projects? In this blog, we explore the pros and cons of Agile and Waterfall methodologies, and help you understand which one is best suited for your project's needs.
January 19, 2023
Technology
What is UX and 5 reasons why is it important?
Are you curious about how user experience (UX) can impact the success of a software project? Whether you're a developer, business owner, or just interested in the topic, this post will provide valuable insights on the importance of UX in software development.
January 18, 2023
Software Development
10 steps to develop a successful software
Want to develop a successful software? Look no further! Our 10 steps guide will show you how to create a winning product that will stand out in the market. From conceptualization to launch, we'll cover all the essential elements to ensure your software is a hit.
January 17, 2023
Technology
What is DevOps and why is it important in the IT sector?
Want to stay ahead of the curve in IT? Learn about DevOps, the methodology that combines development and operations for efficient software delivery. Discover its importance and benefits in our latest blog post.
January 16, 2023
Technology
8 trends in Fintech
The financial technology (fintech) industry is rapidly changing, and it's essential to stay informed about the latest trends. From Artificial Intelligence and Machine Learning to blockchain and cryptocurrency, these trends are shaping the future of finance.
January 13, 2023
Technology
Custom Software vs SaaS: Which is Best for Your Business?
Unsure whether to go for Custom Software or SaaS for your business? Learn about the pros and cons of each option and discover which one aligns better with your business needs and goals.
January 11, 2023
Technology
What is Nearshoring? We tell you 5 benefits of applying in your company
Companies around the world need to be aligned with new technological needs, so they are turning to nearshoring for the realization of their new projects. What is it? What are the benefits? We tell you here
January 12, 2023
Technology
Native or Flutter: Which one is better to develop your next app?
Have you heard of Flutter, but don't know whether to create your application with this technology? What is the difference with native apps? We tell you about it in this blog so you can successfully develop your next app.
January 10, 2023
Technology
Responsive web or mobile app: which one is better to start your project?
What are the main differences between developing an app or a responsive web platform? Here we will tell you so you can make the best decision for your business.
June 30, 2022
Business
Sebastián Florez arrived to boost our growth in North America
At Imagine Apps, we have been redefining the software factory model and supporting the digital transformation of hundreds of startups and SMEs in Colombia and Latin America. In order to consolidate our expansion into the US market, we announce the hiring of Sebastian Florez as Country Manager.
June 1, 2022
Software Development
Web 3.0: The future of the Internet
The evolution of the Internet is perhaps one of the most important events of the contemporary era. Thanks to the Internet, people can find information thousands of times faster than two decades ago, maintain long-distance relationships, carry out activities such as studying or working, upload photographs, and an endless number of alternatives that we can do. But what does the Internet have in store for the near future?
June 10, 2022
Software Development
How do I know if my company needs an App?
When we talk about the benefits of developing an app, increased sales, better communication with users, improved expansion of your business and optimal data collection come to mind. However, the main objective is what will ultimately determine the benefits we will get from the application. Read on and find out why your company should or should not have an app.
June 10, 2022
Software Development
How do I know if my company needs an ERP?
An ERP is an Enterprise Resource Planning (ERP), which is a software that is created and used by companies to manage their day to day. It is normally used for inventory management, project management, accounting management, and others. Its main purpose is to optimize any process that is generating delays or that is difficult to follow or control.
June 10, 2022
Tips
Software Development: What should you know before developing your app or website?
Every year, millions of organizations join digitalization in search of the benefits that we have been sold so many times. But what happens when the digital transformation of these companies is not the right one and there was no previous planning behind it. In the following paragraphs, we will mention the steps to follow so that you don't fall into the trap of being a novice in the digital incursion in your company.
May 19, 2022
Tips
Digital Nomads: What is it and what are the reasons to become one?
Nowadays, visiting different places while going about our daily business is 100% compatible. Thanks to digitalization, the pandemic and other factors, this is no longer an impediment. Here, we explain all about this new lifestyle and the implications of remote work.
April 18, 2022
Software Development
Software development for Latin American business growth
The Covid 19 pandemic drove the digital transformation of the different social strata in Latin America. Due to the integration of digital into daily life, companies in the region are joining this new paradigm in order to better serve the needs of the market.
November 23, 2021
Software Development
Clutch Names Imagine Apps Among Bogota’s Top App Developers for 2021
Clutch has recognized our company as one of the leading B2B companies in Colombia. For context, Clutch is a B2B ratings and reviews platform based in Washington, DC.
March 31, 2021
Business
Cash Is King!
The key for corporate finance is the business cash flow - First it´s important to start from scratch. Note: this article is intended for Non-Financial Business Owners / Founders
February 15, 2021
Business
Innovation with software for SMEs
If founders and CEOs are not using technology to innovate processes, improve service offerings and drive customer engagement, they’re putting the future of their business at risk.
September 28, 2020
Software Development
Software Outsourcing Models for the New Normal
The benefits of offshore development are many, and include cost savings, flexibility, speed of delivery and allowing an organization to focus on core activities like sales and operations.
August 31, 2020
Startups
Developing A New Sales Channel: Mobile App (E-Commerce)
When you are running any kind of business, you create an array of channels that ensure efficient marketing and consistent sales.
September 7, 2020
Business
ERP- A Key For Your Small/Midsize Business
Constant changes in economic landscapes and uncertainty in the marketplace have never been more dangerous for SMEs.
September 14, 2020
Startups
Grow Your Business Through A Mobile App
Mobile phones are the new addiction of our generation. In 2019, for the first time ever, consumers spent more time on mobile devices than watching TV.
September 21, 2020
Business
How To Choose A Tech Partner For Business
Running the business is the most crucial thing a business owner has got to do. Staying on top of technological trends and innovating in business practices is key to maintaining a leading company.