Cash Flow Management is the most important aspect of every business.
We all understand Profit and Loss statements, and it is important to know whether you have made a profit; however, the question asked most frequently is,
"If I made a profit, where is it?"
This is why you need to understand the relationship between the Balance sheet and the Profit and Loss statement. The Balance sheet will record the amount of money in the bank and what you are owed by customers and clients, money in and what you owe to suppliers, staff, GST or loans, and any other areas for payment outwards.
The Cash Flow report will combine all this information to show the money movement. In other words, it is the process of tracking how much money comes in and how much goes out of your business.
A healthy Cash Flow ensures that the business can pay salaries and suppliers on time and has funds for growth and expansion. It also ensures that you have reserves to cover tough times. To predict how much money may be available for your business in the future, you need to prepare a budget or a forecast.
Before you start preparing budgets, consider where your business is going.
The best way to start budgeting is for the key people, staff, advisors, and owners to get together and develop several assumptions about the future.
Having healthy conversations such as:
- Will the business grow, and why?
- Will the business suffer due to opposition activity or a downturn in the economy?
- Is the business suffering due to COVID-related issues?
- Will the business need to look at staff retention or staff recruitment issues?
These areas can help lay out any of the assumptions, and then we can help you build a diverse plan to keep you looking forward.
Budgeting does not have a crystal ball; therefore, by helping you develop a strong business plan with documented assumptions, we can offer greater assistance when preparing solid budgets.
We offer free consultations, during which we will help you work through every step of the process and discuss these critical components of your business. Together, we can find solutions.
What does a consultation look like?
During your consultation, our team will offer practical business advice, including understanding the need for accurate and regular reporting, the role of the Balance Sheet, and Critical Cash Flow Reporting. This information also assists with future Tax planning to ensure you have the proper structure to minimise taxation and secure your business's future.
Key Areas we work on with you are:
- How to monitor and control your Cash Flow.
- When you should be cutting costs.
- Managing cash on the disposal assets.
- How to get a business line of credit (before you need one).
- Why leased equipment, where possible, instead of buying, can create a tax break.
- Creating tax breaks, how to manage your taxation matters.
- How to stay on top of invoicing, payroll, and creditors.
Our services go beyond tax returns and financial statements, distinguishing us from other accounting firms when it comes to Cash Flow Management.
VRA are experts in Cash Flow Management and want to enable your decision making, with more viable options and a clearer understanding of the process.
- We work with you and offer a range of tools, templates, and checklists to help fast-track your business success.
- We have extensive connections with associates who will help you better understand how your business can become Cash Flow positive and regain control of your business growth plan for the coming years.
- We look at and help you make additions to property, plant, equipment, and software expenses you may currently have.
Let's Eliminate Cash Flow at Risk for Your Business!
We want to help you eliminate Cash Flow at Risk!
This means the extent to which future Cash Flows may fall short of expectations due to changes in market variables or unforeseen factors. Working with the three main areas for Cash Flow categories: operating activities, investing activities, and financing activities.
The key difference between Cash Flow and profit is that while profit indicates the amount of money left over after all expenses have been paid, Cash Flow indicates the net flow of cash into and out of a business. Profit is more indicative of your business's success, but Cash Flow is more important to keep the business operating on a day-to-day basis, so working with you to find the right balance is key to your business's survival.
A great example of applying a cash flow strategy is, if you were applying for a business loan, our team can help by offering a solution that frees up Cash Flow by working with the money left over after your company has met operating and capital expenditure requirements. In most cases, this is the best way for financiers to differentiate between good and bad investments.
When looking at improving cash flow in your business our team will take you through the process and importance of monitoring, analysing, and optimising your day to day running which will obtain the best results for the future of your staff and your business. We will work together on expansion plans, staff structure and the importance of maintaining inventory levels to help with the business cash flow.
Vergona Randsmith Chartered Accountants is a smart option for seeking information and helping with Cash Flow management.
Net Cash Flow is an important measure of financial health for any business.
After your initial free consultation, you will need to gather some documentation so we can start the process together. Our team can work with a current accountant, bookkeeper, or office manager to locate the right information.
How is a Cash Flow Analysis Performed?
Our team perform Cash Flow analysis by examining the components of your business that affect Cash Flow, such as accounts receivable, inventory, accounts payable, and credit terms. We then help you to more easily identify Cash Flow problems and find ways to improve your Cash Flow.
How do we Solve Cash Flow Problems?
Many self-employed contractors are too busy with their day-to-day business activities to keep their books up to date, and sometimes, Cash Flow issues are simply the result of poor bookkeeping practices. That includes falling behind on paying bills, invoicing, and/or collecting payment from customers, which creates Cash Flow hiccups.
A simple remedy for many businesses is using accounting software to generate invoices, pay bills, and create Cash Flow statements and accounts receivable reports. Another option is to hire a bookkeeper. Either way, we are here to help you find the right solution for your business.
Many businesses get help with temporary Cash Flow shortages by setting up a working capital line of credit. When you get a credit line, you have a certain amount of credit in an account that you can draw on when you are short of cash and pay back when you have extra cash. We can help you acquire the right line of credit with the best possible interest charges to ensure you don't fall into the deep end.
If you have time to do only one business analysis monthly, make it a Cash Flow statement to keep track of your cash position. If you are unsure if your Cash Flow is positive, that's where we come in. Let us help you decipher where you're at right now.
You may not know that many profitable businesses have gone under because they could not pay their bills. This is because they were waiting for money to flow in before they could pay out. Don't let this happen to your business!
No business is too big or too small to create a winning solution.
Find a Cash Flow solution that works for your business by booking your free consultation today.
3 Simple Tips for Managing Your Cash Flow
Here are some ways to better manage your Cash Flow to avoid a Cash Flow emergency -
Collect receivables: Set up a collections schedule, using an accounts receivable with an aging report as a guide. Follow up on non-payers as soon as possible.
Control inventory.: Set up a collections schedule, using an accounts receivable with an aging report as a guide. Follow up on non-payers as soon as possible.
End Unprofitable Relationships: Decide when it's time to end a relationship with someone who never pays because this type of business, in the end, is a waste of your time and money.
At times, you may need to keep track of Cash Flow on a weekly, maybe even a daily basis, so follow these three areas to define what is happening in your business:
- At the end of this month, look at your total sales.
- Add up the purchases you have made that still need to be paid for.
- The difference is what you need to bring in as income to stay even.
If a monthly cash shortage continues for several months, you may fall further behind and then find that your business will not survive.
Talk to our team and book our free consultation today!
