Cash Flow for Small Business

The importance of having a cash flow budget and projecting forecasts improves your cash position.

Why is cash flow one of the most important
things to understand for any small business?

Simply, cash flow is the life blood of your business.  Cash is King.  It can be the most unpredictable element, particularly for new businesses, as you do not have historical data to rely on; you do not have a history of seasonal highs and lows or where extra cash reserves are required in a downturn.  Cash is often misunderstood as profits, but profits do not guarantee cash reserves in the bank.  Many profitable businesses fail because of poor cash flow and not understanding how important it is to have systems and controls in place to manage your cash correctly.

Essential planning tools for any small business is having a budget, cash flow forecasts and projected profits to measure your actual performance against them.  This allows the business to manage the timing of your cash inflows and outflows.  Trading stock is often a major investment for any business and the implications of carrying too much stock impacts on your cash flow.  By assessing sales, cash flow, seasonal trends and stock turnover we can help you manage your cash needs and the appropriate level of stock for your business.  This can potentially free up your working capital and strengthen your cash position.

At Insight Management Accountants we provide a regular reporting package as part of your business analysis which entails your projected profit and calculates your likely bank balance based on actual performance to date and projected forecasts.  This allows you to identify if and when you may need an injection of funds either via bank finance or whether a reduction in your trading stock may help ease your cash flow burden.  At Insight Management Accountants we are passionate about the success of small business.  Contact us today to discuss how we can help improve your cash flow, grow your profits and the value of your business.

IMPORTANT DISCLAIMER:  This article does not constitute advice.  This article is to be used as a general guide for our clients for their own private information.  Clients should not act in isolation or solely on the basis of the material contained herein. We therefore recommend that formal advice for your situation be sought before taking action in any of these areas.

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