Did you know… Accountants aren’t required to give you advice or reports about your cash flow? They probably won’t have answers on how to fix it either. Most accountants just get you in to sort your tax, and then send you on your way.
While taxes are still vital for a business, cash flow is one of the most important areas in a business, it is easy to mess it up but it is easy to track.
Here’s how to make sure your cash flow brings in a profit, not a loss:
- See if your accounting package has a Cash profit and loss section. This picks up all cash movements. Did you realise your loans and drawings might help you have a good profit but can have a huge effect on your cash flow?
- Prepare a budget. Having an idea of when to pay your bills and when you receive your next payment is essential to managing your cash flow.
- Chase any outstanding debts: Making sure you are paid for the services you provide on time is not only essential but expected. After all, you are an expert at what you do.
- Check your costing: Do you charge enough for your goods or services? If not you could be losing money with every sale.
- Build your business’ cash reserves: Start-ups usually have very little cash. You need to make sure that you have enough cash for what you need when you start up otherwise you may run into trouble. If you forecast your cash flow needs in the beginning when you create your business plan, you can make sure you have enough cash to last you a couple of months while you get started.
- Don’t live on borrowed money. It is easier to borrow money than it is to pay back. If you do need to borrow, make sure you don’t get overextended. And watch that credit card!
- Make sure you control your business spending. Only get things that are absolutely necessary.
- Don’t use your company’s business account as a bank, drawing money for things you want to personally buy. Don’t take drawings; rather wait until your business can afford to pay you a salary. Keep your business account strictly separate from your personal finances.
And above all, make sure you get professional advice. Get your accountant to set you up properly with systems in place to help you create a cash flow and stop you from spending. Then you can work on getting your business profitable.