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By - Allen

What Is The Cash Flow for A Business?

Another term that is frequently used when it comes to business is cash flow. This is also known as cash flow. Cash flow is the difference in money you receive and the money you spend in a certain period of time.

You calculate the cash flow by subtracting outgoing cash flows from the incoming cash flows.

Cash flow, a practical example

At first glance, the cash flow appears to be equal to the profit. That’s not it. Cash flow is about money that actually comes in and leaves your company. An example: 

  • An independent designer does an assignment for a magazine and sends an invoice. He includes the money in turnover and profit. But the amount is not yet in his account.

When you talk about cash flow, you may not include this amount yet. This also applies to depreciation, which you do not spend at that time. Therefore, they do not belong to the outgoing flow of money in the cash flow.

Read all about setting up a cash flow budget here.

Importance of cash flow

Your cash flow is an important indicator for your company. You can still be so profitable on paper, if you have no more money in hand to pay your bills, it is still all hands on deck.

There are many examples of companies that were profitable and yet went bankrupt, because clients did not pay the invoices, for example. 

  • Also read: this is how you deal with defaulters .

The difference between gross and net?

Many people still struggle with the difference between gross or net. Still, in most cases it is a simple calculation: net is gross minus taxes.

If you are employed, you know gross and net mainly from your pay slip. The net salary is the amount that is credited to your account. If you deduct the insurance premiums and income tax from the gross salary, you will receive the net salary.

Gross and net for entrepreneurs

It works slightly different for entrepreneurs. As an entrepreneur, when you talk about gross or net, it is usually about the price of a product with sales tax (VAT). The gross price is inclusive of VAT, the net price is exclusive of VAT.

By - Allen

Covid19: How Chinese Companies Responded To Coronavirus

The spread of the Covid-19 epidemic in Asia, Europe, and the United States have led almost all companies to have to take the necessary measures to guarantee the safety of their employees without giving up the so-called business continuity, albeit reduced speed.

To reach this compromise, various choices were made, almost always temporary, also because of the unpredictability not only of the dynamics of the spread of the infection but also because of the succession of the provisions put in place from time to time by the various Governments.

Even without underestimating the risk of a return infection, Chinese companies have gained significant experience in managing this type of crisis (SARS was the first test in 2003) but have already organized themselves extensively with recovery and post-recovery plans.

Strong leadership but with ears wide open

Quick and coordinated reactions require strong and resolute leadership. However, adapting them to unpredictable changes, which entail distinct dynamics in different situations, also requires individual decentralized initiatives or, better to say: careful listening to collaborators and resources. Many Chinese companies have managed to balance both approaches, setting guidelines from above, while always remaining sensitive and ready to welcome every feedback and proposal that came from their collaborators.

For example, Huazhu, which manages 6,000 hotels in 400 Chinese cities, formed a crisis unit that daily analyzed and updated the procedures to be implemented, and established a top-down approach for the entire hotel chain. Also, it used its internal communication/information platform – the Huatong app – to make sure that all employees and affiliates were always informed and updated promptly. This allowed all the hotels in the franchise to receive the guidelines suggested by the central management and adapt them from time to time to their local situations.

Encourage information transparency and employee safety

When you are in the midst of a crisis, it is not easy to guarantee transparency and clarity of information, as the situation is constantly developing. The information and measures are, in this case, strictly conditioned by the exponential logic of contagion.

Therefore, official news may be deficient, contradictory, out of date, or impossible to put into practice (for example, due to the lack of personal protective equipment, medical equipment, etc.). As if that wasn’t enough, the compulsive bombardment of fragmented, unconfirmed, or emphasized information from the media and social networks increases confusion beyond measure. Employees must be enabled to adopt new ways of working from time to time, and to do so; they must receive clear information and indications from the company.

Some Chinese companies have established proactive guidelines and organized a support service for their employees. For example, Supor, the most important Chinese kitchenware manufacturer, has established precise operational guidelines specifically dedicated to its workers, including instructions to limit exposure and contacts during meals in the canteen and emergency plans in case of exceptional situations. It has also provided rigorous health checks for employees and their families from the first signs of infection, making all the necessary devices (masks, gloves, disinfectants, etc.) available in advance.

All this allowed the company to be ready for recovery and reopen several production lines starting from the second week of February.

Redeploy job flexibility in other activities

When a certain sector is hit hard by a crisis – as in this case, it has happened for tourism, retail trade, catering, entertainment, just to name a few – workers no longer have the opportunity to carry out their usual tasks. But instead of implementing leave or even layoffs, some particularly creative Chinese companies have managed to relocate their employees to alternative production activities, through recovery plans or even “renting” them to other companies which, on the contrary, have instead had an increase of productivity due to coping with the emergency.

In response to a sharp drop in turnover, for example, forty chains of restaurants, hotels, and cinemas have optimized their staff to leave most of their employees available to other businesses, “sharing” them with a new chain of a retail supermarket owned by Alibaba, which was in the absence of staff due to the exponential increase in online purchases and the need to increase the workforce engaged in logistics and shipments.

Reorganize and update sales channels

In the areas most affected by the virus, direct retail sales were heavily penalized. The most agile companies have managed to quickly reorganize their sales systems both in B2B and B2C.

For example, the cosmetic company Lin Qingxuan had to close 40% of its stores and all its offices (offices, warehouses …) within the Wuhan area. To cope with this situation, the company has relocated its over 100 beauty advisors employed in closed stores, “converting” them into online influencers who, using digital tools such as WeChat, have provided support and, above all, engagement to customers, thus redirecting them towards the purchase online.

The result was a 200% increase in turnover compared to the previous year in the Wuhan area.…