First, cash flow is not a simplified concept. It mainly records the cash flow of enterprises in activities such as selling goods, providing services, purchasing goods, accepting services, investing abroad, paying taxes, etc., and reflects the cash receipts and payments of enterprises.
Secondly, cash flow is to enterprises what blood is to the human body. Only with sufficient blood and smooth flow can human body be healthy, and benign cash flow can make enterprises grow healthily. Without sufficient cash, an enterprise cannot operate, let alone maximize its value. As a value-added chain of resource transformation, the whole process from product market research to after-sales service is intertwined with the cash flow of enterprises. The quality of cash flow management determines the survival and future development of enterprises. If we only pay attention to the profit of natural results, but not to cash flow, we will lose the foundation of development and operation, and even the exquisite management plan will be wasted.
At the same time, modern generalized cash flow management includes cash budget management, cash inflow and inflow management, and cash use efficiency management (such as inventory turnover period, accounts receivable turnover period, accounts payable turnover period, etc.). ) and cash settlement management. The most important thing is to make prediction and control, such as compiling short-term cash budget and long-term cash flow budget, strengthening daily control and management of cash flow, reducing cash recovery time and delaying cash expenditure. Only in this way can we manage the cash flow well.
2. Cash flow is more important than profit.
Cash flow runs through every link of an enterprise from beginning to end and is the flow of enterprise life. Cash flow management is of great significance to modern enterprises;
First, cash flow is the power source of enterprise production and operation. In the daily business activities of enterprises, the movement of funds goes from monetary form to physical form, and then to monetary form, in order to realize the appreciation of value. Due to the desire for economies of scale and the need for external expansion, enterprises have a huge demand for cash. Moreover, in order to gain competitive advantage and improve competitiveness in the fierce market competition, enterprises usually need to introduce new business, mergers and acquisitions, etc. , but also must invest a lot of money.
Second, cash flow affects the quality of life of enterprises. Enterprises have enough cash to buy raw materials, auxiliary materials, machinery and equipment, pay labor wages and other expenses, and then enter the production process. However, enterprises need continuous operation and continuous cash participation. At the same time, the products produced must meet the needs of the society and be recognized by the society, so as to sell the products and recover the cash. For the survival of enterprises, cash flow is more important and objective than profit. The profit index determined according to accrual basis is easier to be manipulated and controlled, and cannot represent the strength of the enterprise. However, cash flow is an essential factor for the survival of an enterprise, which can not only reflect its ability to pay, but also prove its credit and strength. In practice, we can see that some enterprises have closed down because of insufficient cash flow, although they have a lot of book profits; Although some enterprises lose money every year, they can survive for a long time because they have enough cash flow, and finally seize the opportunity to grow and develop. It should be said that cash flow is the "detector" of profit quality. If an enterprise wants to continue to operate, it must not rely on high profits, but must maintain good and sufficient cash flow.
Third, cash flow determines the market value of the enterprise. In today's increasingly fierce profit packaging and earnings manipulation, cash flow information can help investors see the true face of enterprises, reflect the investment value of enterprises more truly, and thus reduce investment risks. Adequate cash flow shows that the enterprise is in good operating condition, has strong ability to take risks, and investors' confidence will be enhanced. Because historical cash flow is related to future cash flow, investors' dividend-paying ability can be predicted by historical cash flow. Foreign research shows that the correlation between the market price of enterprise stock and profit index is getting smaller and smaller, but the correlation with enterprise cash flow is getting bigger and bigger. Thus, the securities market has also proved that enterprise value is closely related to cash flow. When analyzing the solvency of enterprises, it is difficult to accurately judge the true solvency of enterprises only based on indicators such as current ratio and debt ratio. Because current assets include highly liquid assets such as monetary funds and short-term investments, assets with uncertain liquidity such as accounts receivable and inventories, and prepaid expenses that cannot be realized at all. Cash in cash flow is the real guarantee that the enterprise can be used to repay debts and other expenses immediately. Therefore, the solvency index calculated according to cash flow can accurately reflect the solvency of enterprises.