This is one of the key performance indicator of your business, as every business either its startup or existing company or a big company cash flow is the best indicator of health.
Its like having good healthy heart which will take care of other parts and keep them in tandem motion.
Be it service oriented company or product company or manufacturing company for all of the business this indicator is crucial which gives the top management to take informed decision well ahead of time and rather than face tsunami at the point of meeting it.
This indicator is crucial as its culmination of all the verticals of business are functioning properly and its easier to find out which vertical of the business is going under problem or where rectification is necessary.
If the cash flow is good then is where you get the enough confidence to look at expansion or diversification or taking your business to next levels, also this same cash flow should be used as indicator where and when things are going wrong and where things need to stop at.
The various indicators of sales, cost of production, cost of service, cost of acquiring customer, cost of sales, demand and supply, expenses of running business, payments realization, if all are performing to its requirement you will have the final indicator in cash flow which will show in green which is cash flow positive.
Lets understand as how this indicator is a method to understand prevention is better than cure.
For e.g. If you are pet bottle manufacturer this indicator cash flow will give your warning way ahead of time by showing that sales are not increasing, then when you deep dive you figure out what design of bottle that you were selling has slowed and will give you clarity what are the types of new designs you need to look at, or is it your distribution which is not performing or is it the manufacturing unit is not doing up to mark or is it the pricing which is effecting the slow down of sales and various aspects.
This indicator is crucial for every type of business be it services, product or manufacturing