Cash flow – How does a small business keep on top of this?


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Cash flow is the movement of money in and out of your business and is one of the most important measures of business health. It is king when you’re contracting, self-employed or running a successful small business - but how do you monitor it?

It sounds easy to track sales on the one hand and expenses on the other then compare the two. But 65% of failed businesses say they closed down because they didn’t know if they were making more than they were spending. It’s also called “running out of money,” and it will shut your business down faster than anything else.

Forecasting when money will come in and out will help you plan for the future. Being able to predict peaks and troughs will help you avoid financial difficulties. A few examples of ways you can monitor your cashflow include:

  • Utilising cloud-based software such as Xero, MYOB or Cash Manager Rural. Enter your creditors (bills) and debtors (income invoices) into the system so that you can anticipate your profit and therefore bank account balance for the month.
  • Use excel to create a running bank account balance forecast. You could enter your anticipated income and expenses by date vertically with a running bank account balance out the side so that you know your bank account balance at any given date.

These processes should be integrated into your weekly or monthly administration time. Before long, you’ll be excited to see what your budgeted profit is. The ability to plan will be paramount as you’ll be in a position to make decisions whether that is looking to diversify the business, continue as is, invest in capital expenditure, repay debt or increase owner dividends. Monitoring your cash flow and having meaningful cash flow reports readily available will also put you in a credible position with banks when looking for finance.

At BFA, we acknowledge that every client is different, so everyone has varying needs. An excel format will suit some whereas others will need the full integrated reporting that cloud software can provide. Others may be visual so prefer graphs. Some may not be able to predict sales so need data analytics to help with forecasting them.

Rest assured, there is accounting software or add-on’s that can help with all of this. They are cost effective, will save you time that you can spend on other areas of your business and provide you with peace of mind knowing your cash flow is being taken care of automatically.

Your BFA Client Manager is there to offer advice and support for any new ideas you may have. Catch up with them regularly to stay on top of your cash flow and business health.