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Why is it important to monitor cash flow in companies in Russia?

To run a business successfully, it is important to know what funds are available at any particular time. Cash flow plans show exactly cash receipt amounts and when they are expected, as well as expense amounts and when companies should pay them.

Cash flow plans allow companies to estimate the amount of funds available at any given time and determine whether or not short-term loans are necessary to top up their current assets. Cash balances show whether companies are able to meet their current needs at any given time.

If a company fails to pay due attention to its cash flow, it is very difficult for such company to forecast its cash shortfalls. This usually results in not having money to pay suppliers’ invoices at the end of the month, and employees of various departments have to promise to pay current invoices with the expected proceeds from the following month. Moreover, due to the absence of a cash flow management system, there is no certainty that such situation will not occur again.

There are even worse cases where companies are constantly in overdraft, which can be closed by banks when companies fail to meet overdraft conditions. As a result, companies cannot pay for anything, dissatisfied suppliers cancel discounts, and this immediately affects companies’ profit earnings.

Insolvency thus sets in when cash flow becomes negative. Such situation may arise even when a company remains formally profitable. And it is precisely with such situation that are associated the problems of profitable yet non-liquid companies on the brink of bankruptcy.

Depending on the situation, it is, though, possible to plan your company’s cash flow at different stages with different time intervals (for example, weekly, monthly, quarterly).

The choice of plan time intervals is yours, since no one knows better than you the particularities of your business and the conditions in which you work.

A cash flow analysis allows choosing the best time for major purchases and devising development strategy for your business, including financing strategy.

If you encounter any difficulties in planning cash flow, you can always seek the assistance of a professional consultant from our company. We would be pleased to help you develop a tool to monitor cash flow, and, if necessary, train your staff to use this tool.