Cash flow management is key to running a successful business. It provides data that allows a small business owner the tools to understand the cash flow issues that require attention.
Discussed below are some misconceptions held by small business owners that can really have a negative impact on the business.
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.
Indications that your may be mismanaging your cash flow is if your creditors are piling up and you don't have the cash to pay, you have stock on hand for way too long or your debtors are taking too long to pay your invoices. These can all lead to a negative impact on your cash flow at the end of the month even if your reports are showing a profit. Ultimately managing your cash should be the number 1 priority, not profits.
The benefits of cash flow management are many. To effectively achieve this it is very important to have a process in place.
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.
Discussed below are some misconceptions held by small business owners that can really have a negative impact on the business.
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.
Indications that your may be mismanaging your cash flow is if your creditors are piling up and you don't have the cash to pay, you have stock on hand for way too long or your debtors are taking too long to pay your invoices. These can all lead to a negative impact on your cash flow at the end of the month even if your reports are showing a profit. Ultimately managing your cash should be the number 1 priority, not profits.
The benefits of cash flow management are many. To effectively achieve this it is very important to have a process in place.
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.
About the Author:
Effective Cash Flow Management starts with professional small business bookkeeping, check out Balance This! is Brisbane's leading bookkeeping provider, offering Australian small businesses a cheap service with no compromise on quality.
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