ABSTRACT
This chapter discusses the technical aspects of cash flow management. Generally Accepted Accounting Principles (GAAP) requires companies to recognize revenues when earned and expenses when incurred regardless of when cash exchanges hands. This means that net income is reported on an accrual basis on the income statement. The statement of cash flows is used to reconcile net income on an accrual basis to the change in cash since the last balance sheet date. As cited in The National Federation of Independent Business (NFIB) survey, the primary reason that entrepreneurs give for cash flow problems is the difficulty in collecting receivables. Cash flow management can cause a great deal of stress for an entrepreneur. Effective cash flow management requires careful monitoring, effective planning and forecasting, and judicious day-to-day policies. The entrepreneur also faces the emotional side of cash flow management, which can create great stress and strained relationships if not effectively handled.
