As business owners will attest, achieving positive cash flow is no pure chance. You will have to work at it which
involves analyzing your cash inflows and outflows.
Knowing that your profit and loss report for that month does not necessary 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 cashflow 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 overstock
- 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 – introduce cost efficiencies through better use of technology
- Short term funding – even if 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 good informed decisions to build a sustainable business.
Need help with getting your business cash flow into good position? Get in touch to have your cash flow in control.
