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Cash Flow Tip – Manage Cashflow in Business – Some key areas to monitor

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Once you start to make a profit in your business, part of good business finance 101 (Ground level) is to follow it up with good cash flow management and the key areas to watch are here. This requires a good understanding and a close eye on what drives the cash flow – both coming in AND going out!

The key areas of good cash flow management to watch are:

  • Income increasing;
  • Pricing for profit – if you’re able to increase prices, do it, competitors will be as well!
  • Timely collection from customers – don’t be a bank for them;
  • Stock management – enough to sell but not too much to waste working capital;
  • Good job management – finishing timely and with the best quality possibl;
  • Continual management and minimisation of costs and business overheads (rent, elec., cleaning);
  • Utilising all credit terms from suppliers and increasing where possible.

The very best way to handle cash flow management is to have a ‘Cash Flow Projection. This is software or a spread-sheet that plots out what your expected income will be (WHEN paid, ie taking into consideration the time customers are likely to take to pay) and what the expected outgoings (actually paid) will be. As well as income it includes any other funds coming into the business, such as asset sales, tax refunds etc. Outgoings will include items such as loan repayments, tax, dividends etc. These are just as important to take into account, as their timing can have a big impact on cash flow.

What are your thoughts? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

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