Cash Flow Analysis
Cash Flow Analysis analyses the 3 types of cash flow statements that show, over a specific period of time, how much cash is coming in and going out of the business. The analysis is helpful to determine the liquidity and solvency of the business.
The 3 types of cash flow are from:
Cash received from customers minus amount spent on operating expenses
Funds spent on fixed assets, long term investments including purchase of stock and property.
Funding that comes from Investors, creditors, or owners.
Why is Cash Flow Analysis important?
From the generation and analysis of these cash statements a business can determine its working capital and observe the inflow and outflow of cash enabling better management of cash in the future.
The analysis of the actual cash basis of the accounts can provide information to determine whether your business has the cash available to remain solvent as well as the ability to meet any future requirements for capital and growth.
Regularly analysing cash flow will also make sure you are aware when you are running short of cash which will enable adjustments to be made. If analysis shows a surplus of cash, decisions can be made about whether to invest or save for a future period when cash flow may be less.
What to do with the information from a Cash Flow analysis?
Regular analysis of cash flow will show up patterns that could be very useful for making future business decisions.
There may be periods of the year or month when cash flow alters creating problems meeting operating costs so appropriate analysis of cash flow will allow changes to be put in place. Bills could be paid at times of the month when cash is available in the business, staff could be employed to fit in with the busier more lucrative periods, prices could be changed to improve cash flow.
The information from the analysis of cash flow if acted upon enables a company to have a better grip on its situation, the ability to pay its operating costs is crucial to ensure a company stays in business.
What to look for during a cash flow analysis
1. Look for positive cash flow
The mark of a company’s ability to remain solvent is to spot when its operating income exceeds its net income, this is an indication that a company has a healthy cash flow which enables it to make good financial decisions for the business.
2. Be wary about a positive cash flow
A positive cash flow should be analysed further to see where the cash is coming from. If the main source of cash is from investing activities and the operating cash flow is negative this may be an indication that the situation is not sustainable. Borrowing to sustain operating expenses may not be the best decision.
3. Analyse your negative cash flow
If you notice a negative cash flow, further analysis is required, it’s not always indicative of a problem. Why is it negative? Is it from the purchase of new machinery and useful investments that will enable the company to be more profitable in the future? If the operating cash flow is positive and investing negative then maybe the company is making lots of money and then using it to help it grow in the future.
4. Calculate your free cash flow
Free cash flow, left over after you pay for operating and capital expenditures, enables a company to invest and grow. This is an important figure to calculate.
5. Calculate the operating cash flow margin
Cash from operating activities calculated as a percentage of sales revenue in a particular period will give a positive or a negative figure. A positive margin gives a measure of a company’s profitability, efficiency and future earning potential.
Have you thought about Invoice Finance as a cash flow solution for your business?
Invoice finance allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.
The benefits of invoice finance companies such as Novuna Business cash flow
Want to understand more Cash Flow Finance terms?
Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.
We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.
Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, the communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional
Great service so far
From start to finish the process for transferring our invoice finance to Hitachi has been been brilliant, a smooth transition, great communication our link Person Jonathan Oakes has helped the process go through seamlessly, A great experience so far and a brilliant start to what we hope will be a long term partnership.