In a corporate business environment, cash flow is essential to solvency.
This can be presented as a record of something that has happened in the past, such as the sale of a particular product, or forecasted into the future, representing what a business or a person expects to take in and to spend.
Cash flow is crucial to a company's survival.
Having ample cash on hand will ensure that creditors, employees and others can be paid on time.
If a business or person does not have enough cash to support its operations, it is said to be insolvent, and a likely candidate for bankruptcy should the insolvency continue.
CIPC requires accountants and auditors to report such insolvent activity and could place a company into business rescue for a certain period of time.
Analysts often use the statement of a business's cash flow to gauge financial performance.
Companies with ample cash on hand are able to invest the cash back into the business in order to generate more cash and profit.
At Taxrek, we cannot stress enough the importance of monthly evaluating our corporate clients' cash flow and planning for the future.
It is extremely important for our corporate clients to be able to cover their financial responsibilities towards their creditors, suppliers, lenders and employees.
Effective planning will avoid a corporate client from being insolvent or becoming insolvent in future.