So you’re just starting out and you keep hearing about how important cash flow is, but no one tells you why.
In a nutshell… Cash flow is king – it’s your business’ fuel-gauge.
No matter the size of your business or the size of your revenue, cash flow is the number one business discipline that every business owner needs to be across. Because at the end of the day, businesses only fail for one reason – they run out of money.
Research from the latest MYOB Business Monitor indicates that cash flow will be a pressure point for 30% of Aussie business owners, and in particular for 27% of start-up businesses (< 2 years).
Tracking cash flow effectively is vital for a business, as poor cash flow management impacts the capacity to make the right business decisions. So it’s vital to keep on top of who owes you money and who you owe money to.
Seek advice! Don’t isolate yourself and ask for help early. You’ll find it’s the difference between make or break in the first few months. So if strong financial management isn’t your thing, find an accountant and/or bookkeeper who can help you.
Get the right tools and advice you need for successful cash flow management. Having a good accounting program overcomes some common pain points associated with managing cash flow (and it helps with completing your BAS and dealing with compliance). Keeping your records up-to-date and accurate will give you an understanding of your cash flow position, at any time. It’ll reduce the stress and make business life much easier. It’s also something MYOB can help you with – MYOB LiveAccounts
Practice cash flow forecasts. They can be really simple, look at your current cash flow position (as in how much money do you have in the bank right now) and evaluate what your cash flow position will need to be in 3 months’ time (as in how much money you’ll need to have in the bank). The gist of this is to help you understand when you might not have enough money to pay certain bills or employees in the future.
For example, if you know businesses in your industry are usually quiet over December and January, but you’ll have tax installments or certain bills to pay at that time, you can establish when you might have a short fall and when you’ll need to plan ahead for that time (so if you know in advance that you won’t have enough cash flow at a certain time, you can start to put some away and also have a chat with your bank and investigate your options). What we want is for you to have enough cash to fuel your business in the leaner times.
It can all sound a bit scary – but it doesn’t have to be. And by getting on top of it from the start, will help set you and your business up for success.