Spending your time worrying about cash flow?
As business owners will attest, achieving positive cash flow is no pure chance. You will have to work at it; which involves analysing your cash inflows and outflows.
Knowing that your profit and loss report for that month does not necessarily mean you will have cash in the bank during the month. Even a profitable business on paper can end up in bankruptcy due to poor cash flow management.
There are a number of solutions which you have heard of, however, a good balance of these solutions will help you build a more sustainable business in the long term.
For a start, have a good clear picture of your business cash flow with a cash flow forecast. You can discuss with your accountant to work out a cashflow forecast. Use technology to help with the forecast, Xero has a solid forecast feature.
Plan ahead to take care of these areas:
- accounts receivable – ensure your invoices are getting paid; if you are suffering from late payments get help to address this issue
- inventory – check that you are not overstocked
- tax payments – do not forget to factor in statutory payments deadlines and we know dealing with tax is painful; yet building a good handle over this area will free up some of your worries
- keeping your expenses under control and introduce cost efficiencies through better use of technology
- short-term funding – even if the business does not need funding, it will be wise to have a short-term funding facility in place to cover temporary cash shortages
It is good business to have a regular routine to review and plan your cash flow movements when you look for ways of fine-tuning your business model. Having an accountant who understands your business numbers gives you opportunities to make well informed decisions to build a sustainable business.
Need help with getting your business cash flow into a good position? Get in touch with us to put your cash flow in control.
Contributed by Molly Lee
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.