What is Cash Flow ?

Cash flow refers to the amounts of cash being received and spent by you during a certain period of time. Cash flow reports should be used as a financial planning tool for your personal finance.

A cash flow projection sets out all the expected payments and receipts in a given period. The transactions that are displayed in a personal cash flow chart are expected active and passive income, incoming and outgoing loan repayments, monthly expenses etc...

Cash Flow system

Cash flow statement is a financial report, which only shows incoming and outgoing money during a particular period. It doesn't include non-cash items such as depreciation or purchases on credit. Your monthly cash flow statement will be used by your tax consultant, accountant and personal financial planner. It is an important factor for personal with limited liquid assets as they are vulnerable to devastating cash shortages and unexpected expenses.

Winning in cash flow

When predetermined cash receipts are available they can be valued as assets. Such income streams can be purchased or sold due to the present value of their future cash flows. There are many reasons one may need or want to sell cash flow such as to maintain a steady flow of working capital and to increase financial flexibility by converting non-current assets into ready cash. The cash flow funding process can be applied to annuities, leases, insurance benefits paid in installments, retirements accounts, royalties, lottery winnings and tax lien certificates.

When planning the short-term or long-term personal wealth building, it is more important to anticipate the cash requirements than to just project capital appreciation.Study of the cash flow and proactive steps to develop a healthy and positive cash flow assures the stability of your wealth creation and multiplication. Winning in the cash flow business means cash in should be more than cash outflow.

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