What’s Holding Back The Cash Flow Improvement Of Your Business?

Cash flow management can be termed as monitoring, analysis and adjusting the flow of cash in a business to guarantee that there is sufficient cash to settle payments when they become due.

Ashroon Shah
Sep 4, 2018 · 3 min read

It may sound uncomplicated but for many business owners keeping track of expenses and profits can be very wearing. For a production facing trouble or going through financial distress, cash flow management can even seem like an impossible task. For this matter Tax Preparation Services in Penrith are popular as they provide us with help and expert advice with a lot of problems.

Tax Preparation Services in Penrith

Cash flow management is crucial to the growth of any business. If your business is facing difficult times, effective cash flow management becomes especially important if your business is to survive. Cash is ruler. It is a fundamental requirement if you want to save your business.

Have a budget

Prior to preparing your cash flow budget, it is essential to first know and have a careful understanding of your balance sheet. Many business owners get over-enthusiastic regarding selling their products and services and focus only on profit and loss instead of looking at the entire financial situation of the business. This can prove incurable to a business as hale and hearty profits can often camouflage an impending cash flow problem. Have an appropriately structured balance sheet and make sure you understand all the figures included in it. When you have an inclusive balance sheet, you can develop a cash flow budget or a cash flow projection. A cash flow budget is a forecast of the expected inflows and outflows of cash in a business over a phase of time, usually 12 months. It can show what finances are available to pay business expenses and can also forecast the bank balance of your business at the end of each month. Preparing a cash flow budget facilitates you to anticipate the months in which finances will be tight so you can plan ahead for these months. It also permit you to predict the months in which there will be extra cash so you can think about in advance how to best use the short term cash surplus. You can work along with your accountant to physically prepare a cash flow budget. If you are hesitant how to begin preparing your cash flow financial statement, it would be best to consult with a business turnaround expert as they have knowledge and experience in cash flow forecasting.

Lessening of credit terms

While having a cash flow financial plan is a great help in planning your finances ahead of time, another solution to recuperating cash flow is to get more money into your business. One way to do this is to cut down your credit terms. widen credit to customers is a common practice for many businesses but make sure that the credit terms you are giving is not slowing down your cash flow.

Prioritizing payments

If your supplier gives you a credit term of 60 days, then use it. Do not feel rushed to pay it earlier than 60 days. Obtain benefit of credit terms being extended to you whenever you can. Prioritise outflow according to the severity of consequences if you fall short to make payment. Prioritise wages, suppliers and ATO payments.

These ways you can make an idea and Talk to your tax agent of Tax Preparation Services in Penrith to be sure that you are investing your time in something worthy.

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