Five tips for managing cash flow

Article from Heather Smith of Flying Solo with support of Australian Online Casinos

Apply these five practical tips to your business processes to help with managing cash flow and avoiding cash mismanagement pitfalls.

1. Maintain accurate financial records

You need accurate, timely and readily available financial data to assist you in making business decisions. This is achieved through implementing a good accounting system and setting aside regular time to review the financial information.

This may include outsourcing bookkeeping and accounting duties; however, it is critical to remember that as the business owner or director you are unable to abdicate responsibilities for your financial situation. Your accountant still requires you to sign off on the accuracy of your accounts. Someone else can do the grunt work, but you still need to maintain accurate and timely data.

2. Prepare a cash flow forecast

A cash flow forecast is an analysis of cash coming in and cash going out of the business. Do this on a regular basis so you can identify potential problems before they occur, and are in an informed position to proactively deal with them.

3. Set aside GST Collected

Don’t mistake GST Collected as business money. An easy solution for keeping GST Collected separate from business money is to set up a parallel bank account, and siphon the GST Collected into it, so you are not tempted to use it. When it comes time to pay Business Activity Statements (BAS) you will be prepared for the cash obligation. Many banks will offer this sort of bank account free with your business-banking package. The same can be done with Superannuation and PAYG Withholding liabilities.

4. Monitor your spending habits

When it comes to spending money, I have seen new business owners maintain spending habits they developed when they had a corporate job and someone else was footing the bill; or they justify their spending as a tax deduction and rationalise that it only costs half what they are paying for it. This is a spending trap that should be avoided. Be thrifty, and budget for business spending.

5. Get paid on time

Focus on actively collecting outstanding accounts receivables. Ensure you have a thorough process in place to make sure invoices are paid in a timely manner.

If you do find yourself experiencing cash flow issues, review your business processes and actively communicate with the Australian Taxation Office, your bank, and your accountant to understand the options available to you, and the solutions that can be implemented.

Do not hesitate to contact Jaguar if you require any assistance with managing your cash flow or implementing any of these valuable tips.