As your Chartered Accountants in Nelson and Marlborough, we’re pretty keen on that old business saying… “Revenue is vanity, profit is sanity, but cash is king.”
There’s an important distinction between profit and cash flow, and even if your business is profitable you need to keep an eye on your cash flow. Whether you’re a small start up or have been in the game a while; one of the most important facets of running a successful business is cash management. You’ve got to have regular income coming in to ensure you have enough to pay your debts, expenses and wages.
So how do you successfully manage cash flow, well like all good things it starts with a plan. Forecasting cash flow is a really important skill to have, and thankfully for you it’s what we do… It’s just one of the services that our specialist Business Solutions team can carry out for you. Our years of experience allow us to support your business’ growth. We’ll help to predict your income and estimate your outgoings; so that you have a clear picture of when and how you’re going to need to meet tax obligations and other outgoings. You’ll be able to plan asset purchases and we can estimate when you’ll need to approach your bank for finance to allow for sustainable business growth.
Once you have your forecast in place, there are many small steps you can take to manage cash flow; here is a list of our top five simple tips…
- Invoice regularly and on time. If you wait seven days before you even prepare your invoice for a customer/client, you have already delayed that cash coming in to your business by seven days.
- Collect receivables. This comes down to your terms of trade and payment. Make sure that your terms are clear on your invoices and follow up on them. If your terms say that you charge on overdue accounts, then be sure that you do. Some businesses find that rather than impose late payment fees they’re more successful in collecting receivables if they apply a prompt payment discount.
- Hang on to your cash for as long as possible. Don’t fork out for your accounts payable until they are actually due; but be sure to pay them on time to avoid late payment fees! Talk to your suppliers about their payment terms and negotiate better deals.
- Subscription sales. Offering deals on your products or services to customers who buy for a fixed period of time is a win-win situation. Your clients/customers get a better deal and you get the cash up front.
- Invest in an accountant. Once again, that’s where we come in… We can review your cash flow forecasts and results on a regular basis to measure your performance and business success, and to help you make strategic decisions about your business, by forecasting the financial impact of those same decisions.