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Five Things Online Merchants Should Know about Cash Flow By Ina Steiner http://www.auctionbytes.com/

f you wonder why you have trouble paying bills despite operating a profitable business, you might have cash flow issues. Denise O'Berry has over two decades of operational and
management experience and has built a successful consulting business
helping small-business owners (see her website at DeniseOBerry.com). She writes a weekly column and wrote the book,
Small Business Cash Flow: Strategies for Making Your Business a Fin...). AuctionBytes
sat down with Denise and asked her what online merchants and
marketplace sellers should know about cash flow to help them stay on top
of their business finances.

AuctionBytes: What is cash flow and why is it important to an online retail business?

Denise O'Berry: Cash flow is about the flow of cash coming into and moving out of your business. Cash comes into your business via sales and moves out of your business via expenses. If you have more cash
going out of your business for things like web hosting, shipping fees,
and payroll expenses, than you have sales coming into your business, the
business will not survive.

It's important not to confuse profit with cash flow. You might buy something for $10 and sell it for $20 which would yield a $10 profit, but that doesn't equal cash flow. Payment for business expenses will
need to come out of that $10 profit. Once all the expenses are paid, the
amount of money you have left is the cash available (cash flow).

Many small businesses run on tight cash flow, especially in the current economy, so it's important to keep an
eye on what's ahead. I recommend that every small business prepare and
monitor their future cash flow by using a cash flow budget. This is a
projection of sales and expenses for at least the future six months so
you have a good idea what your financial situation will be and can fix
it before it becomes a crisis. Don't confuse a cash flow budget with
typical business financial statements like the income statement and
balance sheet. These reports provide good historical information on your
business, but won't help you much with what's going to happen in the
next few months like a cash flow budget will.Read more     http://www.auctionbytes.com/cab/abu/y210/m11/abu0274/s04


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Replies to This Discussion

Thank you for this article!!

thanks. this is the hardest thing i had to learn when i started full time. i did not make a distinction between business and personal (net profit) money.


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