How Much Hidden Cash is in Your Business?
It is not bizarre that many small businesses start out hoping to make a profit. It seems logical to aim for a higher amount earned than a higher amount spent.
Only looking at profit margins and not taking the time to properly monitor your cash flow, however, can lead to bills not being paid and your business falling out of favour with the bank, your suppliers and your employees.
If your company is mostly profitable, then you should be able to find ways to come up with the cash you need for everyday operation. However, your hard-earned cash could be hidden throughout your business, making it difficult to access it when you need it. To find it again, your best bet is to employ a cash flow management system for your small business.
Firstly, you need a way to easily be able to monitor your business cash flow at any point in time.
Our small business cloud accounting software is the simplest and most efficient way of tracking your business accounts. By keeping a record of your financial transactions, you will be in a stronger position to both create budgets, and respond as soon as you see your cash levels dropping. Any places where your cash is leaking out of your business or is hidden and inaccessible will be located and you can take steps to improve the cash flow management of your small business.
Discover Where Your Money Is Hiding
Once you have this program in place, and can understand your cash flow with some clarity and accuracy, you will be able to see where your cash is hiding within your business.
A common source where you can increase your cash flow is in your customer invoices. Specifically look for customers that are often paying you past the deadline, or where you have extended very generous deadlines to them.
Incentivising your customers to pay early by offering a discount, or by reducing the amount of time they have to pay, will increase your immediate cash flow.
Your money might also be leaking out to suppliers. If they have started increasing their costs or asking for payment earlier, you may find that your cash levels begin to decrease rapidly. Try to negotiate with your suppliers as they may be able to give you a better deal, especially if you are a loyal customer. Otherwise it may be better to seek your business elsewhere.
It is important that you regularly are checking your cash flows for any sign that your business is struggling because of how you are paying your suppliers.
It is true that you have to spend money to make money.
Investing in certain assets and technologies will help make your business run more efficiently and can save you time and money in the long run. But the cash that you desperately need may be tied up in these assets and inaccessible when you need them.
If you have been monitoring your cash flow, you will be able to see when it is most appropriate to spend money on these items. If your cash is running low, it may be better to put off that large expense until your cash levels are higher. There will be little benefit in improving your business efficiency now if you can’t pay your employees and suppliers next week.
Save You Time
Another benefit of using cash flow management software is that it saves you time with your business accounting. Even if you employ a professional accountant to help you with your tax obligations, you have to ensure that your books are ready for him or her to look over.
For a small business owner with little accounting experience, this can be a laborious task that takes up hours of your precious time. Everyone with a small business knows that every minute wasted will lose you money. By using a comprehensive accounting platform, you will spend less time frustratingly rustling together your accounts. You will also be able to generate easy to read reports that are exactly what your accountant needs to see.
By being accurate and up to date, your accountant will be able to get you all the tax deductions you are owed, saving you money as well as time.
Check out our earlier post on some of the best cloud-based tools that will save you time and give you more opportunity to work on the parts of the business that will bring in the money. Or try Cashflow Manager Cloud for yourself and see how you can save time and take control of your accounts.