When was the last time you looked at your numbers?
Operating a business can be tricky during the best of times. However as most people understand, the current economic climate requires you, as a business owner, to monitor your business numbers even more closely. The closer you monitor them the more likely you are to be able to reverse bad trends before they become big problems.
I would recommend the starting point for any business owner is to start with analysing their cash flow. Without cash flow a business might as well shut their doors. Therefore I believe it’s crucial to implement efficient systems to monitor and understand all your cash flow drivers.
I hear you ask what are your cash flow drivers? I’ve listed my top 4 cash flow drivers below:
- Increasing your sales would appear to increase cashflow. However, if large proportions of your sales are made on credit, when sales increase, your accounts receivables increase, not your cash.
- Customers pay when they receive an invoice, so it is vital that this is done frequently. More regular invoicing results in money coming in more consistently.
- Inventory and WIP can be a large outlay for any business. To reduce the impacts of tying up cash in stock, review ways to reduce time this stock is held.
- A sale doesn’t count until the money’s ‘in the bank’. The longer your customer’s account remains unpaid, the less likely it is that you will receive full payment. Therefore it is essential your debtors system be well managed.
The old adage ‘cash is king’ is still relevant in today’s market.
Kim Jay CA – Director