Effective cash flow management is a key to any small business.The data that it provides can assist the owner of the business to know which cash flow issues require their attention.
The common misconceptions by small business owners, discussed below, results in many business’ failing. Don’t be a statistic, read on and understand the benefits of cash flow management.
The ATO has recently announced that small businesses are appox. AUD$9 billion in debt on their BAS statements. This highlights not only the significance of optimal cash flow management for small businesses but when compared to 2 years ago (approx. AUD$4 Billion) it shows that businesses are actually getting worse at this. The high level of debt highlights severe cash flow problems that a large amount of Australian small businesses are going through. An effective way to combat this is through regular cash flow reviews with your accountant or experienced bookkeeper.
Many small businesses that run at a profit still fail from poor cash flow management. This is because the general application by small business owners is ‘PROFIT’ = ‘CASH’. This is not the case.
Mismanagement of cash flow can be using cash to purchase inventory that sits on the shelf for ages, having outstanding debtors that are long overdue or letting your creditors pile up. Your cash flow can be suffering in the background when your monthly reports is showing a profit. At the end of the day, keeping on top of you cash flow should be your priority, not profits.
It is very important to have a well planned process in place to reap the benefits of your cash flow managment.
Proper cash flow management helps identify key areas where cash is locked up and may need to be reviewed. Have you ever wondered where all your cash is going, even though your business is running profitably? This is where cash flow management can produce the data needed to help you as a small business owner make better decisions.
Data based decisions are always the best. A small business that understands their income statements, balance sheets, forecasts and cash flow statements are going to be in a better position to make good decisions.
Proactive Cash Flow Management starts with professional small business bookkeeping, check out Balance This! is Brisbane’s leading bookkeeping provider, offering Australian small businesses a cost Proactive solution with no compromise on quality.
Author: Aston MichalsThis author has published 1 articles so far.