Cash Inflow VS Cash Outflow<\/span><\/h3>\n\n\n\nWhen we talk about the inflows vs outflows of cash, we are basically comparing this two-component of a business cash flow. To present this in simpler terms, we will compare them using a table.<\/p>\n\n\n\nTERMS <\/strong><\/td>CASH INFLOWS<\/strong><\/td>CASH OUTFLOWS<\/strong><\/td><\/tr>Definition<\/td> Generally, cash inflows refer to all the money that comes into a business. <\/td> The cash outflow refers to the entire money leaving your business. They are generally expenses incurred by the business within an accounting period. <\/td><\/tr> Examples<\/td> Examples of cash inflows include the following; investment returns, interest receives on loans, sales, financing, and so on.<\/td> Money spent on fixed assets, salaries, payments made to suppliers, loans taken and interest paid on them, wages, transportation costs, and insurance dividends that you must pay are all examples of cash outflow.<\/td><\/tr> Effect in an income statement<\/td> When there is an increase in cash inflows, it results in a positive number on the statement and this also increases the level of assets a business owns.<\/td> When there is an increase in cash outflows, it is a negative figure that indicates the business has made a payout. Examples of a payout include a dividend payment, salaries and wages, repairs, utilities, debt payments, and so on.<\/td><\/tr><\/tbody><\/table>Cash inflows vs Cash Outflows<\/figcaption><\/figure>\n\n\n\nExamples Of Cash Inflow<\/span><\/h3>\n\n\n\nCustomer payments, investment returns, and interest on debts you’ve made to another firm are all examples of cash inflow. <\/p>\n\n\n\n
Calculating your Business Net Cash Inflow<\/span><\/h3>\n\n\n\nTo calculate net cash inflow, subtract total fixed and variable costs from the company’s annual revenue. <\/p>\n\n\n\n
Practical Cash Inflow Examples<\/span><\/h4>\n\n\n\nUsing the following examples, let’s calculate XYZ’s net cash inflow<\/p>\n\n\n\n
XYZ recorded $10,000,000 in revenue from sales, investment, and financing. Its variable costs is $750,000 and its fixed cost is $500,000. <\/p>\n\n\n\n
Using the above formula, $10,000,000 – ($2,500,000 + $950,000)<\/p>\n\n\n\n
$10,000,000 – $3,450,000 = $6,550,000<\/p>\n\n\n\n
The net cash inflow of XYZ for this accounting period is $6,550,000<\/p>\n\n\n\n
If Murray’s poultry has $ 1,000,000 in revenue, $450,000 variable and marginal expense, and about $250,000 on its fixed cost, calculate their net cash inflow.<\/p>\n\n\n\n
Still using our formula, subtract total fixed and variable costs from the company’s annual revenue. <\/p>\n\n\n\n
$1,000,000 – ($450,000 – $250,000) <\/p>\n\n\n\n
$1,000,000 – $700,000 = $300,000<\/p>\n\n\n\n
Murray’s farm recorded a net inflow of $300,000<\/p>\n\n\n\n
Tips for Improving Cash Flow<\/h3>\n\n\n\n How can I increase my business cash flow is a question every business owner wants the answer to. Fortunately, this is focused on either reversing a negative cash flow or increasing a positive one. To accomplish this effectively, you must either raise cash inflows or decrease cash withdrawals, or both. The following are some of the proven ways to boost your business’s cash flow. <\/p>\n\n\n\n
#1. Pay Vendors In Time<\/h4>\n\n\n\n Making payment early is one of the best ways to build relationships with your vendors. Who knows, you may be offered a discount incentive that helps reduce costs. You can also boost your overall financial efficiency with credit and debit payments.<\/p>\n\n\n\n
#2. Reward Customers for Early Payments<\/h4>\n\n\n\n Well, it is unfortunate but businesses deal with creditors. Some just love delaying payment. Others actually use the money meant for you for other purposes. One of the ways to get customers to pay in time is by using baits such as discounts. Customers’ late payments can put pressure on your financial flow. Everyone loves discounts. <\/p>\n\n\n\n
#3. Increase the Efficiency of Your Accounts Receivable Processes<\/h4>\n\n\n\n If you do not already have an online payment system, try and incorporate one. Such as credit, debit, and even ACH deposits. They usually help businesses take care of late fees that come with mailing checks. Additionally, setting up regular payments is also very helpful to SaaS companies. It handles the issue of chasing clients and reminding them about payments. Take on any process that will send on an invoice in time, this will give clients enough time to pay up their due. The bottom line is simply to eliminate any long process in terms of receiving payment. That is why the SAP ERP and order management is perfect for online stores and e-commerce. This will help improve your cash inflow.<\/p>\n\n\n\n
#4. Rather Than Purchasing, Consider Leasing<\/h4>\n\n\n\n Depending on your business’s financial capacity, you can decide to lease rather than buy the property or equipment. Especially if you want to finance your purchase through loans. If your business finance can handle it, then you can go ahead <\/p>\n\n\n\n