Page 53 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
Monitoring the Cash Flow statement is also important
from qualitative aspects. It is not only important to see if
the net results of Cash Flows i.e., Cash Inows – Cash
Outows is positive during the period under review, but
it is equally important to see the source of such positive
cash ow.
As stated earlier, the cash generated through regular
business activities is called Cash from Operating
Activities. If a business is generating negative Operating
Cash Flow and compensating the same by Sale of assets
or issue of shares or receiving new loans, thus creating
positive Investing or Financing cash ows, it is giving
signals that something is wrong with the operations of
the business, which cannot be ignored. While Cash
shortages may create difculty in running the business
in the short term, above activities will create a bubble,
which may harm the business owner as well as other
stakeholders in the near and distant future. It is
necessary for a business to prepare a Cash Flow
Statement – Current and projected, to survive in the long
run, by proper management of the fund.
To understand the frequency of preparation and use of
Cash Flow statements by the respondents from the
MSME sector, few questions were asked to them.

Frequency of preparation of Cash Flow forecast - 46%
respondents prepare their forecasts monthly, 19%
prepare their forecasts quarterly, 10% prepare half
yearly forecasts, 14% prepare annual cash ow
forecasts. 12 % respondents never prepare any cash ow
forecasts.
Frequency of preparation of Actual Cash Flow
statements - 43% of the respondents monthly, 19%
quarterly, 9% half yearly, 20% annually prepare their
annual cash ows. 9 % respondents never prepare their
Actual Cash Flow Statements.