It’s vital that you know the cash flow situation of your business, but why?
Money flowing in, and money flowing out is one of the most important measures of your business’s health. Approximately 2/3 of failed businesses say they closed down because of financial mismanagement, including issues such as lack of cash flow visibility. In other words, they didn’t know if they were making more money than they were spending.
However a detailed cash flow forecast can give you so much more, enabling you to identify opportunities, or to anticipate problems so that you can plan how to tackle them.
For example, If you identify seasonal variations in profits, you can plan ahead for busier periods by; gearing up staff resources to maximise sales, identify cross sales opportunities from these customers, and giving these customers offers that will also encourage them to return during quieter periods. You can also plan ahead for quieter periods by considering; special promotions, introducing new products, and gearing down staff resources to minimise costs. As you understand how & when cash flows in and out of your business, you will be well placed to adapt and react to your market place, before any issues become major problems.
Cash is King!
Money in and money out is the ultimate measure of business health and sustainability. You should watch it carefully, even if that means regularly updating your cash flow spreadsheet. The effort is well worth it. If, however, you’d rather spend the time on other parts of your business, or with your friends & family, contact Remigius Bookkeeping & Accounting today and we will be delighted to help