Whether you’re new to business ownership, or have been running a business for some time, there are important metrics to keep in mind. Cash flow and working capital are very important to the life of any business. That is why any business owner need to know how the two are different, the importance of keeping records and how to increase these two values. Here’s a look at these important factors in business growth.

What’s the Difference?

Cash flow represents how money is moving in and out of your business. The positive number in this flow is money you generate through providing your particular good or service to customers. The negative number is what you pay out regularly to maintain operations and pay your employees. Cash flow can be computer on a weekly, monthly, quarterly or even yearly basis.

Opposite cash flow is working capital, which deals with measuring your assets and liabilities. It’s a “big picture” way of looking at your finances. For example, while the first would keep track of a particular monthly loan payment, the second keeps track of what your loan balance is currently.

Why Keep Records?

It’s a common fallacy for new business owners to assume cash flow will work itself out. That you’ll just one day notice you have less or more money than you did before. This is not the case. It is important to keep cash flow records, both so you can track growth and so you can make projections about the future.

Similarly, keeping records of your company’s capital is also important. When you keep track of how much debt you have, how much you’ve paid off and how much your business can support, then it’s easier to see when you can schedule your next growth push.

How Can You Increase These Important Values?

Once you start recording your cash flow, you should be able to notice certain patterns. This is important to increasing your cash flow. By determining where you are gaining and losing money, you can make decisions about what to promote or cut from your business.

Increasing your working capital comes from a larger amount of planning and analysis. Identify which of your assets can improve in value, or which of your liabilities will soon be paid off. Knowing how assets and liabilities change over time means you’re better prepared to take out a loan when needed, or sell off certain properties.

These two metrics, cash flow and working capital, are important to the growth and longevity of your business. Use this basic introduction while making an effort to understand your business’s growth potential.