‘Cash is King’ and ‘Cashflow is the lifeblood of business’
Whichever cliché you prefer, we can’t deny that they all ring true. At Walker Davey Searells we’ve also found the following rings true.
Cashflow is the prime cause of angst amongst those who own or run a business. It’s not just start-up businesses where this can cause major problems, even established, successful ones can experience a cashflow crunch.
It’s nothing to be ashamed about. It’s just par for the course in the world of business.
How many of these questions apply to you?
- Are there times of the year where you struggle to pay bills or expenses?
- Does an unexpected bill or expense cause stress about how you are going to pay for it?
- Are you ever having to wait for customers to pay you before you can settle what you owe your suppliers?
- Do you have more expenses than income each month?
- Are you struggling to keep up with current expenses? Are bills paid late?
- Do you ever go into overdraft unexpectedly?
- Do you regularly dip into your personal bank account to top up your business, or use your credit card to cover expenses?
- Are you putting off/cannot afford to pay taxes?
- Have you stopped taking drawings or a salary from your business?
- Is your business turning away orders/jobs because it cannot fund them?
If most of these statements apply to your business, you may be about to experience a cashflow crisis.
Common mistakes with cashflow are:
- Failing to forecast;
- Slow invoicing or debt collection;
- Not having a rainy-day fund;
- Confusing profit with cashflow;
- Forgetting to allow for tax payments;
- Not seeking advice or help early enough.
If you use modern accounting software, we can prepare reports quickly which highlight where your cash has come from and where it is going. When combined with a daily cashflow planner, or cashflow forecast, you can understand more about your business and its cashflow and make business decisions with more information available to you. If we can be of any assistance, please give us a call.
Information in this article was originally published by Tax Management NZ (TMNZ).