Cash flow planning

Businesses use a cash flow plan to predict how much cash flows in and out of the business each month. These plans can help companies understand how much incoming cash they need to cover their outgoing expenses. After building a robust cash flow plan, a company with cash management, budgets and other important financial aspects of the business. Since managing cash and income is a large part of many business operations, a cash flow plan can streamline this process. Additionally, when companies utilize this tool, they can prepare to have cash for future circumstances.

Professionals in the insurance industry also use cash flow plans, but these plans have a specific purpose. Insurance cash flow plans help agents determine potential rates for clients' insurance packages. While this is a useful tool, the general cash flow plan is more applicable to every type of business or organization.

Few things to consider including in a cash flow plan:
Operating activities:
Operating cash flow activities cover any incoming cash a company earns by selling goods. Outgoing cash in this category includes activities like purchasing merchandise, raw materials or paying employees.

Investing activities:
Another category for a cash flow plan is investing activities. Long-term investments, purchasing property or buying new equipment all qualify as investing activities in a cash flow plan.

Financing activities:
Other types of activities to include in a cash flow plan include financing activities. You can classify financial decisions like long-term loan payments and stock sales for your organization in this section of a cash flow plan.