Running a successful business means you have to strike a balance between you income/outgoings and learning about cash flow can help you achieve this.

Smaller companies are particularly vulnerable to financial ups and downs as they tend to have less capital and assets. Banks may be less likely to lend them money if they have not built up a solid history with the firm concerned. However, larger organisations are not free from the effects of unstable markets.

To avoid potential problems it's wise to get familiar with how money is moved around your firm so you can prepare for times when your income does not match your outgoings. The term used to describe this process is cashflow and you're able to take an in-depth look at this by attending training courses. It's different from profit, which looks at your finances at a specific time, whereas cashflow is more dynamic because it takes into account a larger chunk of time and all the ups and downs this includes regarding your money.

More businesses would thrive if they had the money they need at the exact moment it's required, but this not generally the case and is a reason why some firms fail. For example, if you're company makes fashionable clothes, it's likely that you'll be creating them well before they are due to hit the shops. In early summer, shops tend to introduce their Autumn range, but these garments will have been made months before they are introduced in retailers' outlets.

This means that you'll have to research what may be popular with shoppers and create the items well before you've made any sales. To do this you'll need cash, but if you haven't made sales then this could prove difficult and is a classic example of a cashflow gap. Of course, there are many routes that you're able to take to get access to credit, such as banks loans based on previous order numbers, while some firms like to ask their customers for a deposit.

As you can see, you may not always have money in your business account when it's required, so learning more about cashflow could help your firm succeed. Pinning down your inflows and outflows are an essential part of this process, with inflow examples being income and outflows expenses and accounts payable. Once you've taken a good look at these factors you'll be able to establish some important facts that may help you to further plan your borrowing and spending.

The most basic fact is to find out exactly how much money your firm currently has, because this will give you an idea how much stock you can order and if you need to ask for deposits from customers. Next, you'll need to take a look at all the outgoings associated with keeping your business going and work out when you need a cash injection and where this will come from. Once this is all collated you'll get a clear picture on how the income and expenses impact the money you may need if you're thinking of expanding your company and boosting customer numbers.

Putting together a cashflow statement is a sure-fire way of discovering if they'll be any gaps in your income and outgoings. These allow you to put measures in place should you need any, while they are often required by potential investors who are keen to see the financial health of your firm.