What is net cash flow?
Net Cash Flow is the difference between the cash coming into a business and the cash going out of a business during a specific period of time and this is the net cash flow from 3 different areas.
- The cash involved in the operation of the business including cash coming in from sales of services and/or products and cash going out from rent, wages, marketing and bills.
- The cash involved in financing a business including outgoing cost of paying off debt, cash to shareholders and dividend payouts plus money incoming from borrowing or the issuing of equity
- The cash involved in Investment activities including money incoming from investments or sale of an asset and money paid out for investments including the purchase of equipment or assets.
Why is understanding net cash flow important?
It is essential to have cash in a business to ensure its day to day running costs are covered, if you cannot meet your bills you could quickly go out of business even if over a longer period of time your business is profitable.
However a positive net cash flow is not necessarily a good thing and a negative net cash flow necessarily a bad thing; it all depends on where the cash has come from or where it is going to.
Keeping a track on cash flow, whether it is positive or negative, over a particular period of time is very important in understanding how your business is managing and will manage in the future. It enables you to follow the flow of cash and identify periods when incoming/outgoing costs are higher or lower. This could be crucial when planning, in particular when decisions will involve cash coming into or leaving the business. Making sure you are not short of cash in your business for any period of time could be the key to your success.
Cash Flow is also important information for lenders and potential investors to see. A positive cash flow is important as they will be concerned about receiving repayment of a loan or a return on their investment.
How do you calculate net cash flow?
Net cash flow is calculated by subtracting outgoing cash flow from incoming cash flow over a specific period of time.
Net Cash Flow = Incoming cash (Operating, Financial, Investment) – Outgoing cash (Operating, Financial, Investment)
Net Cash Flow = CFO + CFF + CFI
Where CFO = Net Cash Flow from Operating Activities
CFF = Net Cash Flow from Financing Activities
CFI = Net Cash Flow from Investing Activities
What are the limitations of net cash flow?
There are various limitations of net cash flow, which include:
- The cash flow figure alone does not show the profitability of a company, just the cash available in a specific period
- Positive cash flow from a loan that needs repaying may not be positive for the business and negative cash flow from a investment that could reap future rewards may not be negative therefore care is needed to see the bigger picture
- The net cash flow figure is historical and therefore unable to be used to forecast future cash flows
- This can make it hard to assess a company’s liabilities accurately from this figure alone
- Net cash flow should be taken as only one part of an overall picture when assessing the health of a business
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.