For every business, financial management is vital and for the same entrepreneurs hire a team of skilled professionals. However, this does not seem sufficient, and many are now leveraging technology to do the same. It is no secret that if financial management is done right, there will be an improvement in the overall financial performance. Now the question arises the way business intelligence (BI) manages to do the same. Let’s find out the same. Yes, it does it by offering detailed cash flow insights by analyzing their financial data. It gives a complete status of the cash flow by presenting them via charts, graphs, etc. This, in turn, helps the key decision-makers to make smarter business decisions. Decisions that can prove vital for improving productivity and eventually the financial performance.
Types of cash flow
Business intelligence tools analyzes all three types of cash flows effortlessly so that entrepreneurs can know well about their financial health. These cash flows are as follows:
Cash flow from operating activities (CFO)
This represents the cash that a business receives from its regular and ongoing business activities. For example, cash flow by manufacturing and selling those manufactured goods to its customers or providing a service. However, this cash flow from operating activities does not include the amount of cash invested in the business, salaries of employees, or building rent. Its focus always lies on the core business. In short, it is the net cash obtained through its operating activities.
Cash Flow from investing activities(CFI)
This represents the cash obtained from activities related to investment. For example, purchase of physical assets, sale of securities, or an investment in the same. It sometimes happens that there is negative CFI due to huge or long–term investment in research and development (R&D). However, in such a scenario, it does not signify poor financial health.
Cash flow from financing activities
This represents the amount of cash that a business receives from issuance of equity and debt, payment of dividends, debt or equity repayment, and so on.
If a business has surplus cash, it is assumed that it is operating in a safe zone. When BI provides such insights about the cash flow, entrepreneurs get adequate help to develop a detailed understanding of the steps that they should take to maintain a consistent flow of sufficient cash. They have prior knowledge of the liquidity of their business. In short, the financial performance never gets compromised with such insights. Sound financial decisions are taken based on these insights that help in superior financial performance and business growth.
Without BI, entrepreneurs have to spend hours reading and analysis of their cash flow statements. Most of the time, such financial reports are made in Microsoft Excel with several rows and columns from which it becomes tough to identify meaningful data insights. With business intelligence, such things don’t happen. Moreover, there are now several tools powered by business intelligence at an affordable price which has encouraged their widespread adoption by entrepreneurs to improve their financial performance.