Page 83 - MICROHUB Handbook - ENGLISH

FINANCIAL MANAGEMENT OF A CRAFT

MICROBUSINESS

Whatever the size of the company, sound financial management is the

cornerstone of all successful enterprises. Even successful and possibly
profitable businesses will collapse without it. A craft entrepreneur

should know how to manage and track small business cash flow and
implement financial planning and forecasting.

The amount of money that flows into and leaves your business during a

certain time period is known as cash flow. If you want to stay in

business, you must have "positive cash flow," which is when you get

paid more than you spend. If your company has sufficient cash flow, it

will be able to pay its debts on time and cover any unforeseen expenses.

There could be times when you have "negative cash flow," for instance,

if you purchase a new piece of equipment, or if a customer's payment is

past due. To compensate for this cash flow shortage, you could have to

rely on a bank overdraft or short-term loan. But as long as the negative

cash flow has been anticipated and your company returns to a position

of positive cashflow, it shouldn't pose a significant issue for your small
business. Typically, cash flow is monitored throughout a predetermined

reporting period, such as a month, quarter, or year.

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