Bismillahir Rahmanir Rahim
Assalammualaikum Warahmatullahi Wabarakatuh
dan Selamat Sejahterah.
WHAT is a cash flow statement?
A cash flow statement shows all your income (cash inflows) and expenses (cash outflows) for a given period of time. It is a basic tool to check your financial health and assess your financial position.
Proper management of your cash flow ensures that you always have sufficient income to pay for all your expenses and puts you in a good cash position.
What is your cash position?
If you receive more than what you have spent after deducting your expenses, you have a surplus (positive) cash position. However, if you spend more than what you get, then you are said to be in a deficit (negative) cash position.
Total cash inflows > Total cash outflows = Cash Surplus
(KEEP UP THE GOOD WORK)
Total cash outflows > Total cash inflows = Cash Defisit
(YOU MAY WANT TO REVIEW YOUR SPENDING)
When your cash position is in a deficit, you will most likely use borrowed money to subsidize the cash shortage you are experiencing.
Spending exactly what you earn does not count as a good cash position either. When you spend exactly what you have, it means that you do not have any savings in case of emergencies. Imagine, what would happen to your cash position if you lose your job or earning capability?
To be in a good financial position it is advisable to have cash surplus at all times. A cash surplus not only allows you to keep money aside for unexpected expenses but also gives you an opportunity to build your investment. This will bring you closer towards achieving your financial goals.
So how can you manage cash flow to achieve cash surplus? One of the most effective ways is through the use of a budget.
Will be back with topic What is a budget.