Question

2. Why is cash flow important to government entities? How does an administrator plan for cash flow? What tools are available for this purpose?

Answer 1

What is a Cash flow statement?

a cash flow is an entity that helps the company or the party concerned to understand the cash that they have spent. The cash flow statement is used with profit and loss statement and balance sheet.

Importance of Cash flow statement:-

• informs the government of the cash being spent on different projects or business or schemes
• it helps the government in planning the future policies and schemes
• it helps the governement in deciding whether to continue the with a particular scheme or not on seeing the cash that has been spent on it versus the cash gained form it.
• helps in deciding the activities to gain more cash
• helps in eliminating he activities that have losses
• deciding on investment
• timely payments checks etc.
• eliminates uneccesary expenditure and adds on neceesary income methods

In order to achieve success the comapnies follow the cash flow statement so that they are not just able to gain profits but also gain good image in the eyes of the suppliers and buyers. The same applies for alrge scale businesses also. Cash flow managment simply means delay in the outlays of cash as long as possible while encouraging the payments as soon as possible for the members who owes one.

The adminstrator needs to plan the cash flow. Start by seeing the cash that you have in hand in the begining of the period along with other receivables that are due to be received. then we see the payment from customer, interest earned, the due that we got in form of partial collection of debt, the service fees.

then we see that how and when to spent each penny so that we get more in return. Not necessary we get the return in near future or in the form of cash. like salaries of the employee, rent, cash dividends etc.

this also included making decisions related to the cash flow like pay bills that are less forst then pay the large bills. try earning more cash by certain techniques like renting the machine or space etc. try receiving the payments from the customer. There certain techniques from which the customers are attracted to pay the bills as sson as possible.

tools taht help in doing so are:-

1. planguru
2. float
3. scoro
4. quickbooks
5. pulse
6. cashanalytics
7. google docs