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Cash flow software is a way of keeping track of the timeline of your income and expenditure on a computer. It's usually aimed at businesses rather than individuals. For most businesses it will be a very useful tool, but it's important to choose software appropriate to your needs.
It's important to note that cash flow is not the same as profitability. Cash flow does not measure how much money you have coming in and going out in total. Instead it tracks the time of those transactions so that you can forecast what your bank balance will be at a particular time. This can let you spot times when you will not have enough cash on hand for your commitments and take appropriate action such as getting an overdraft facility, asking to delay payments, or insisting you receive money earlier.
Cash flow software allows you to automate the process of tracking future payments. It's particularly useful as it can cope with changes easily. While you can plan your future expenses and income by hand, a single change such as a payment being delayed or a regular charge changing can mean you have to recalculate from scratch. Cash flow software will automatically update all the future figures to reflect these changes.
For individuals, and businesses with very simple set-ups, dedicated cash flow software may be unnecessary. A simple spreadsheet program such as Excel or an alternative can suffice. You can either use pre-made templates or set up your own document to keep track of the figures. However, more complicated businesses will benefit from dedicated software.
You should look for cash flow software which offers enough flexibility. Some basic systems only measure cash flow on a weekly or monthly basis. This can be fine for simpler accounts, but for firms which deal with large payments, it may be necessary to forecast on a daily basis as even a few days' discrepancy between money coming out and going in can have serious consequences.
You should also look into how easy it is to customize the categories each program uses to organize payments. Cheaper programs may come with fixed categories which cover most common business set-ups. However, for more complicated businesses you may want a more advanced program which lets you better control the way your data is organized.
It's important to look for cash flow software which is compatible with any other financial software you use. For example, if you use accounting software, it can be extremely helpful if you can easily synchronize it with your cash flow software. If you hire an accountant, check whether the cash flow software your are considering buying is compatible with any systems they use. Choosing software which is widely used in the financial industry may also make it easier if you are trying to attract financing or investment and need to supply figures.
If you are buying online, make sure you choose software which is appropriate for your country. It may seem like a cheap option to buy a program from a major market such as the United States and simply mentally replace references to US dollars with your local currency. However, this can look very unprofessional if you need to create reports. Using software from another country could also cause problems with date conventions. Such software could also be problematic if the two different countries have differing legal conventions or standards on how you are allowed to make cash flow forecasts, for example in the way you treat overdue payments.