In Cash Flow: The Life Blood of Business mergers expert witness Steve Rabin writes:
Cash is essential to the success of any business. Cash is the “life blood” that keeps a business operating. If cash drys up, the business fails. Understanding your business’ cash flow is a key managerial skill.
Failure to properly plan cash flow is one of the leading causes of small business failures. Understanding the basics will help you better manage your cash flow. Cash flow considerations become even more important as the economy struggles and businesses need to tighten all financial controls.
Your business’ monetary supply can exist either as cash on hand or in a business checking account available to meet expenses. A sufficient cash flow covers your business by meeting obligations (i.e., paying bills), serving as a cushion in case of emergencies, and providing investment capital.