Tips for Managing Cashflow
It is often said that cashflow is the lifeblood of business and it really is true. Having the cash in the bank when you need it is going to be the difference between success and failure for your business.
The first step to managing your cashflow is to make sure that your accounting records are up to date and accurate so that you always know the financial position of your business.
Invoice promptly and follow up immediately when overdue. Get as many payments as possible up front so that you aren’t chasing payment long after the work has been done.
Invest in accounting software. Spreadsheets take up a lot of time and it’s easy for errors to creep in. Software allows you to produce management reports and measure KPIs so that you can track how you are going.
If you don’t have the time or the skills to manage your own accounts hiring a bookkeeper to keep on top of your finances can be a good investment. Otherwise make sure that you get some bookkeeping training to make the most of the system.
Implement an accounts payable system so that you always know how much you owe and when you need to pay it. This also allows you to keep on top of inventory so that you have sufficient to cover your orders but not too much so that you are hamstrung to do anything else.
Open a separate tax account and regularly transfer a portion of your income into it to cover income tax, GST and PAYE. It helps if you think of it as not being your money and that you are just managing it for IRD. This means you won’t get caught out by huge tax bills.
Open a savings account and gradually build a cash reserve. This will help you take advantage of opportunities or to get you out of trouble if you experience a sudden downturn.
Taking charge of your cashflow is the first step in creating the business of your dreams.