It is essential for business owner’s to actively manage their cashflow on an ongoing basis. It goes without saying that day to day decision making will be impacted by what cash is available.
7 steps to control short term cash flow
Your cashflow is the money you have coming in from revenue and going out for expenses.
Even profitable businesses can fail if cashflow is not managed properly.
By understanding your short-term cash flow position (45 to 90 days) you can significantly reduce the risk of failure and/or reduce the financial stress on the business (ability to pay debts when they are due).
It is essential for business owner’s to actively manage their cashflow on an ongoing basis. It goes without saying that day to day decision making will be impacted by what cash is available to spend (net cash position).
We work with many clients on short term cashflow forecasting. Outlined below are the 7 steps to take control of your short-term cash flow.
- Review outstanding sales invoices owed and estimate the date you expect to receive the cash.
- Review work in progress and work expected to be completed in the coming weeks and estimate the date you expect to receive the cash for those work items.
- Review all supplier bills and expected supplier bills and estimate the date you expect to pay those bills.
- Review upcoming tax obligations such as BAS and IAS requirements and estimate the date you expect to make payment.
- Review your super obligations and estimate the date you expect to pay super for the last quarter.
- Review your wages schedule and estimate the pay runs for the next 45 to 90 days
- Review all other cash outflows such as rent, utilities, etc and make an estimate as to what the next 45 to days look like.
By going through the steps above, clarity can be gained over the upcoming cash balance which can then lead to impactful decision making. For example, if cash is forecasted to be poor, additional effort may be directed to calling upon outstanding invoices or negotiating additional terms with suppliers.
Additionally, there are great real time cashflow planning tools that help simplify the process. We largely recommend our clients adopt or use float, a cloud based cashflow planning software program.
If you have would like assistance with forecasting your cash, please contact our office to arrange an obligation free consultation.
