Cash Flow Planning

Written by Jill Morrison
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Cash flow planning is one of the most important considerations in business. New businesses must begin planning their finances before their businesses have opened. They can choose to purchase necessary materials outright, with financing, or with a lease, depending on their current budget and the amount of materials they need. Most businesses cannot afford to pay for equipment when they are first starting. Leases and loans are the most affordable options for new businesses with limited cash flow.

Cash Flow Planning Tools

For adequate cash flow planning, businesses will need to determine a financing plan that works for their budget and type of business. Professions that need extremely expensive equipment to function, such as dentistry and other medical practices, may need to finance all of their expensive equipment purchases. These industries also have the option of leasing equipment, rather than purchasing it with a loan.

Leasing is a popular alternative for many types of businesses that are working on cash flow planning. Businesses rent equipment for an extended period of time when they agree to a lease. Lease terms usually fall between 36-60 months and may exceed this for certain contracts. Leasing is a great way for businesses to maintain the most current and effective types of equipment in their fields. At the end of lease terms, businesses can decide whether to purchase the equipment, return it, or upgrade for a better model.

Some businesses know exactly what type of equipment they need and also know that they will use the equipment for many years. A good example of this is the purchase of a heavy duty truck for construction work or deliveries. In this case, purchasing equipment with a loan is a more desirable choice than leasing. Purchasing allows businesses to have full ownership over equipment and how it is used.

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