Cash
Receipts
A business can receive
cash from a variety of activities or sources, such as:
- sales to customers
- sale of equipment
- investments from the
owners of the business
- financing
The sources of cash can
be grouped into three areas:
Operations
The first major source
of cash is cash received from operating the business, generally the
selling of products and services. Cash is usually received on a regular
and recurring basis. It can be forecasted and planned for. You receive
this money when customers pay you, either at the time of the sale
or and from the collection of sales on account to which you have extended
credit.
How and when your customers
pay for your product or service will affect your "cash flow". The
sooner a customer pays you, the easier it is for you to manage the
cash flow of the business.
Investments
The second major source
of cash is cash received from investments. Cash received from investments
can include the sale of the investments, such as CDs or stock, or
the receipt of dividend or interest income. Other investing activities
include cash received from the sale of fixed assets (such as equipment)
or from refunds of deposits. This cash is usually determined by the
business owner and can occur at any time.
Financing
The last major source of
cash is cash received from financing. Cash received from financing
includes cash from loans, leases or from the issuance of stock. A
business rarely receives cash from these sources more than once or
twice a year.
Understanding the factors
that affect the amount and timing of these receipts is important in
forecasting cash flow. Knowing when you will need additional cash,
and developing strategies for getting it when needed, is part of managing
your business.
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