It’s simple enough — if your business doesn’t have enough money coming in, it isn’t viable. And that’s cash in your bank account, not invoices you’re trusting will be paid promptly, or work you haven’t done yet.
It’s staggering, though, how many business owners have no idea of their cashflow. Whether you manage your own finances or employ someone to do it for you, if it’s your business, you need to know all about your cashflow.
Here are five questions to ask yourself.
Do I Have a Positive Cashflow?
In other words, is the money coming in more than the money going out? Besides determining whether you have enough money to run the business on a daily basis, this allows you to plan for large items of expenditure that may be coming up.
If you monitor your cashflow, you can also monitor money owed. Do you have consistently bad debtors, or are there signs a previously good payer is turning into a bad debtor? Keeping an eye on cashflow can help you pick this up.
Are There Risk Factors?
Risks may involve upcoming deadlines for payments, including loan repayments, and whether any of your customers are showing signs of cashflow problems. There may also be external factors, such as increasing interest rates or changes in the market.
If you’ll struggle to meet a payment, for example, you may be able to arrange a short-term business loan to carry you over the problem. But that won’t help if you leave it till the final demand arrives.
Is My Profit Growing?
A simple way to monitor your business’s level of success is to track whether your profit is growing year-on-year, and if so by how much. It’s also useful to keep track of whether your net sales are growing.
This enables you to assess whether or not you’re meeting your goals. If you’re not (and maybe even if you are) this offers a tool to readjust your goals for the future.
How Do I Manage My Cashflow?
You need a means to monitor your cashflow in order to make accurate forecasts about your costs and revenue and have all the figures at your fingertips.
There are various automated cashflow systems available, including a recently released platform called Avrium. This plugs into accounting software like Xero and QuickBooks and works with CreditSafe to provide credit data about customers and suppliers.
Am I Fully Prepared?
The business world can always throw up something unexpected, and the best preparation is to be sure of your cashflow situation. Preferably a healthy one, of course, but if you know where you stand, you can adapt more easily to the unexpected.
If you want to discuss your cashflow issues, you’re very welcome to get in touch with me.