Introduction Cash flow is an integral part of your business, and though the name seems pretty straightforward, the concept of cash flow is complicated. A properly managed cash flow is the first step towards better business and growth. So understanding the advantages and disadvantages of cash flow is necessary to succeed and sustain your business in the long run. Advantages of Cash Flow for Your Business Understanding the benefits of cash flow is necessary before comprehending how its management will increase the impact of its advantages. 1) Better Lending and access to capital: Though it seems counterintuitive, good cash flow can give you access to better lending options. It can showcase the financial strength of your organization. Moreover, you will have wider access to cash flow-based credit solutions like CF Pay Later by CredFlow, which will give you a credit limit of Rs.30,00.000 that you can use to do vendor payouts. It needs no collateral as it is a cash-flow-based solution. 2) Expand Business with good cash flow: A good and healthy cash flow in your organization would help you manage your operations efficiently. Whether it is your working capital or vendor payments — with good cash flow, your product inventory will grow, giving you more opportunities for the expansion of your business. Also, you can negotiate better prices with timely vendor payouts. Thus, you can position yourself better and negotiate discounted prices with your vendors. Therefore, good cash flow will help you get the capital you need to grow your company. 3) Reduction in running debts: A good cash flow will help you reduce previous debts that you have to incur during the initial phase of the organization, i.e., to pay for salaries, wages, and all the other necessary expenses. What is a Cash Flow Statement, and Why do you need one A cash flow statement is a financial statement that defines the spending of cash during the accounting period. It will give a brief overview of the sustainability of your operations in long and short-term durations. There are three sections of a cash flow statement: So addressing the elephant in the room, why do you need a cash flow statement? Conclusion Thus, your cash flow is an essential pillar in your organization — helping your organization to navigate through difficult economic situations. Creating cash flow statements is critical to place your organization in a strategically advantageous position by ensuring you always have good working capital.
Significance of MSMEs in the Indian Economy
MSME industries are defined on the basis of the investment they have done in their businesses and the turnover as per the MSME Act of 2006. These small-scale industries Introduction MSMEs are the backbone of the Indian economy — they have contributed 30 per cent to the GDP in the financial year of 2022. They are a testament to the zeal of the Indians to thrive in any way possible — that is how the small-scale industries scaled to big brands such as Mother Dairy or Verka. Furthermore, realising the potential of the SMEs government of India launched tremendous schemes for this sector, ranging from the emergency credit line to e-commerce marketplaces such as ONDC. Role of MSMEs in Job Creation The MSME sector generates numerous jobs for both skilled and unskilled labour, thus becoming one of the largest employment generators in India. Also, they brought a certain level of industrialization to rural areas cost-effectively by establishing industries in the countryside. In this sector, it has the potential to generate more employment than big industries because they require low capital to set up but need numerous workforce to sustain the operations. An example of this phenomenon is Amul; it started in the 1940s as a small cooperative in Gujrat. It scaled its operations through India, and today, it employs 1.6 million people. Though MSMEs are facing considerable challenges in creating jobs, such as: Why does MSME is an Integral Part of the Supply Chain in India It is imperative to think about Indian supply chains working without the intervention of MSMEs at various touch points. For instance, in the global supply chain, MSMEs are the largest auto parts manufacturers exporting to the European continent. Indian government launched the IndiaXports portal, which will provide information to MSMEs to compete in the global market. It will help them understand the rules and regulations of foreign countries that they need to follow to do business in any overseas markets. Thus, MSMEs have the potential to be globally competitive and market leaders in their respective areas of expertise. Conclusion The MSME sector is the principal driver of the transition of the Indian economy from an agricultural-dependent market to an industrialized economy. There is a long way with hurdles and challenges along the way, but without the MSME sector, the Indian economy cannot develop.
Cash Flow vs Profit — Why Both of them are Crucial for Business
Introduction Cash flow and profit are the two sides of the same coin that will help you to raise your business to new heights. Although these terms are distinguishable from each other considerably, they are dependent on each other. So, you must understand cash flow vs profit. Further in this article, we will discuss how both of these metrics will impact your organization. Cash Flow — The Life Blood of Your Organization Cash flow is the total inflow and outflow of capital from your organization — it determines the working capital of your business — if you want the growth of your organization, you need to grow the cash flow. Moreover, a cash flow statement is necessary because it will help you to demonstrate credibility and showcase the financial health of your organization in front of your key stakeholders. So optimizing your cash flow will help you in the growth of your organization. There are applications like CredFlow which will help you to get a 360-degree view of your revenue line, and you can automate the process of sending payment reminders. So, it will help you to improve your cash flow and reduce the payment collection time, thus, improving your working capital. Profits — Source of the Fuel for the Growth Engine of Your Business Profits are the net revenue of your organization after paying up all the business expenses. So whatever income you take home from your business is the net profit of your organization, through which you can run your expenses or reinvest in your business for growth. Therefore, the profit of your organization will drive the expansion of the business because you can expand your business with the capital you earn. Thus, if your business is profitable, it will help you to grow your organization and expand in various verticals. Budget planning is also important for the growth of your organization. How Cash Flow Uplift Profits When your organization has a good and healthy cash flow, you can invest in newer business opportunities, thus expanding the sources of revenue. Moreover, with a positive cash flow, you can lower the overall debt of your organization by paying the interest through cash flow. So, the overall profitability increases in your organization. Furthermore, expand your product inventory with a good cash flow, which will, in turn, raise your turnover and take-home income. Therefore, positive cash flow can help in increasing the profitability of your organization through indirect means. It can be the stepping stone toward a better future for your organization, but it does not guarantee that your business will remain profitable in the future. There are instances where the cash flow is negative, and the business is still running with good profit. Though in those cases, by the end of the day, organizations cannot sustain themselves in the long term. Conclusion At last, cash flow is crucial for the business as much as the profits of the organization. These are both metrics that will help you to grow your business and flourish. As both of these metrics are different but both of them are equally important for the next phase of growth for your business. So if we want to grow our business cash flow vs profit is equally important. Therefore, creating a budget plan is important which includes both profit and cash flow statements.
