Cash flow Planning & Management in Small Business

“Revenue is vanity, profit is sanity, and cash flow is king.”

Verne Harnish,

founder and CEO of Scaling Up.

Maintaining a positive cash flow is one of the most essential objectives in your business. This means that you have more cash flowing into your business rather than out of it. And as you receive more cash from customers, new business loans or investments, or sales of assets, you’ll find that your cash spending is decreasing, too.

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But when a business has a poor cash flow, they’ll experience a number of problems in a domino effect. According to a study by Money.com.au, 52% of business owners struggle with cash flow issues. This includes being unable to pay suppliers or give salaries to employees, losing track of debt repayments and gaining penalty fees, and even having overdue invoices with customers. These are critical problems that can be solved with effective cash flow management.

Cash flow management is important for your business to grow and be financially secure. And for a small business owner, this should be a top priority.

What is good cash flow management in a small business?

Incorporating the best financial practices in your cash flow planning will improve the finances of your small business. Regularly monitoring and reviewing your cash flow allows you to accurately predict how much money your business will bring in and how much you can spend on growth and investment opportunities.

Rigorously reviewing it also ensures that you don’t overspend and that you stay within your budget. Without proper cash flow management, it’s easy to find yourself guessing how much money you have and end up overspending it. Or worse, spending money that was already allotted for something else.

Some of the best practices to improve your cash flow are:

Establishing your break-even point - This makes it easier to know if your business is encountering cash flow problems. If you’re consistently going over the break-even point, then your business earns profit. But if you’re having trouble hitting it, then there’s an issue that needs to be identified and addressed.
Reserving an emergency fund - Having an emergency cash reserve (ideally worth three to six months worth of expenses) gives your business security and flexibility, especially during economic downturns.
Setting invoice timelines and terms - Providing your suppliers and customers clear terms and deadlines minimises late payments. It also reminds you of the dates you need to follow up with them, if necessary.
Assigning an accountant to monitor your cash flow - A certified accountant will offer expert and unbiased advice on how to better manage and improve your cash flow. Positive cash flow opens up opportunities to grow because it allows you to manage and track the money coming in and out of your business. Depending on your cash flow statements (i.e. a financial statement that summarizes the amount of your cash and cash equivalents), you can invest in research and development, provide more training for your staff, purchase more assets, or even upgrade your equipment.

Why an accountant is best to help a small business with cash flow management

Accountants are recognised as highly trusted financial advisors for small business owners. In an unpredictable world where the economic (and even political) climate is always changing, an accountant gives invaluable insight on how to maintain your financial security and business growth despite external factors. Managing your cash flow is one of the most important ways to do this.

Some of the benefits of working with an accountant include:

Costly errors are quickly identified and corrected - Their expertise and attention to detail allows them to catch errors in your financial statements or processes and correct them immediately, so that you can avoid hefty overheads.
Improved processes - An accountant understands the way your business operates, and makes sure to systemise your cash flow processes effectively, such as your invoices and payment collections.
Accurate forecasts and predictions - Accountants will analyse your cash flow statements and then provide projections on how your business will develop, allowing you to make more strategic decisions.
Funding options and investment opportunities - Because you’re handling different aspects of the business, you might be missing out on opportunities for funding, loans or grants that you’re eligible for. An accountant keeps an eye out for these options and will bring them to your attention.
More time to focus on core business - Once you leave a trusted accountant to manage your cash flow, you can prioritise the development of other important business aspects.

How our small business cash flow management advice works

We tailor our cash flow management advice to your needs. We ensure that you have the means to build your small business, keep it financially secure, and take advantage of opportunities for growth.

Our personalised advisory services focus entirely on your business and its success. We know there’s no such thing as a “one-size-fits-all” financial guide for all business owners. So, we study your business and finances and actively listen to your needs, your current financial issues or problems, and your long-term goals. This allows us to protect your financial affairs and help your business grow to its full potential in the best possible way.

Here’s how we’ll work with you:

We conduct an initial conversation with you.
We ask questions to better understand you, your business, and the pain points that you are experiencing.
We have a formal meeting with you once you’re comfortable with us and perform an audit of your current financial practices and position by looking at profits and losses, balance sheets, and financial projections. We ask about any insights you may have on your cash flow.
We create a workable solution based on our review and walk you through our proposal so you understand what you’re investing in.

We conduct a strategy meeting once the person becomes a client whereby we will create the forecast
Once the forecast is completed, we’ll present it to them based on the meeting and additional assumptions
We create dashboards that can be monitored live
We will regularly review reports and dashboard discuss what the data is telling us

We help you achieve your goals by creating the space for growth. When you’re not stressed about your accounting, you have more time to focus on growing your business.

We also provide tax planning and tax advisory to support your cash flow. And we pay close attention to how tax law constantly changes (though we know this isn’t the case for most business owners), so we’re excited to help you optimise your tax position and provide you the tax relief you deserve.

“Before working with HY Accounting we thought our business strategy and accounting was up to speed—wow, we were wrong. Michael and the team delivered a real and achievable growth plan which is driving us to double digit growth month-on-month. Thank you.”

Nathan Butcher, Founder of Spinfluence Marketing Agency.

If you want a trusted financial advisor that understands your financial needs and can help you bring more money in the business with good cash flow management, we’d love to partner with you.

Book a call and let’s achieve your goals together.

You’re about to take the first step towards becoming a better business.