A cash inflow can be described as money flowing into the company.
Examples of cash inflows include:
- Capital investment
On the other hand, a cash outflow can be described as money flowing out of the company.
Examples of cash outflows include:
- Equipment purchases
- Loan payments
There are three very important reasons why a cash flow statements are important to business owners:
- Assist business owners in making informed decisions. You will be able to determine which department in your company, for example, was the most profitable. Or even whether a specific product line’s sales have increased over a period of time.
- Tell investors whether they should invest their money into your company. Once your cash inflows are greater than your cash outflows, it will place you in a better position to receive funding.
- Demonstrate your are accountable. By producing financial reports on a regular basis, it shows you are committed to conducting your financial practices in an ethical manner. There’s nothing to hide!
Make it a priority to produce your financial statements on a regular basis. This practice will benefit you, the business owner, in the long run.