Cash flow, simply put, is the money flowing in and out of your business. Good cash flow is essential and is a sign of a healthy business. If you're new to managing cash flow, the information in this guide may be useful to you.
Successful cash flow depends on the timing of money flowing in and out of a business. Income and expenditure rarely happen together so good cash flow can help you prepare for shortfalls.
Here are some options you might like to consider to help you reduce the impact on your business:
These questions may help you figure out your business cash flow position:
If you answered yes to these questions, you may be experiencing some problems with your cash flow. Consider implementing some better cash flow management practises, or speak to your accountant or your bank for more guidance.
Budgeting for the business financial year will help you foresee any cash flow problems before they occur. Your bank may also need to see your budget if you're applying for a business loan to help with your cash flow. You may want to split your budget into monthly cycles for closer management.
Think ahead to what the next 12 months may bring, and monitor your cash flow forecast with what is actually happening in the business.
A detailed day-to-day cash flow forecast can help you predict how much you will spend on businesses expenses, and make in profit from sales, which can help you plan ahead for cash flow shortfalls and surpluses.
Generally your forecast should include:
For more ideas on how to stay in control of your business finances, see our 10 tips to manage your business cash flow.
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