Deciding to expand our business is no easy task and going into dept to do so is a risky undertaking. It is wise to asses the risks carefully and thoroughly before taking on new debt for productive assets.
All of us probably want to improve our business but the wisest and most successful will make certain they can afford it before taking the steps or making the changes.
That is where our daily record keeping comes in handy again.
Using these records we can create a cash flow statement which we can then use to predict our future income based on past performance. We should also be very careful to factor in any foreseeable challenges or changes to our cash flow in our equations and calculations. Some room should also be left for contingencies.
There are three main steps to creating a cash flow statement:
- we need to look at past performance
- we need to look at future costs and expences
- we can then analyse and predict the cash we will have available in the future
Based on this analysis, then we can figure out the best way to grow our business.
Do we add to our product selection? do we need to focus on decreasing or expenses first? do we need to focus on increasing profitability of what we already have? and can we afford to start evaluating possible loans?