Ever wonder why some businesses thrive while others, well, don’t? In many cases, the difference comes down to these two simple words: cash flow.
Business owners who know how to effectively manage their cash flow have an automatic leg-up over those that don’t.
That’s because a positive cashflow means they’ll always have cash to fall back on when things get tough. Not to mention, they’ll have the funding to expand without having to take on additional debt.
Need bookkeeping in Melbourne to improve your cash flow?
Call the experts at Maximum Business Solutions.
Based in the beautiful Bayside suburb of Beaumaris, we provide comprehensive small business bookkeeping to businesses across Melbourne. We are a Xero Gold Partner and MYOB experts helping you implement smarter and more efficient bookkeeping solutions.
But first, what is cash flow?
Simply put, cash flow is how much money you have in your business, and how cash coming into your business stacks up against cash going out.
- More money coming in than out: positive cash flow
- More money going out than in: negative cash flow
It’s important to know that cash flow is not the same thing as profit.
You can be making huge profits while having negative cash flow (where more money is going out than coming in). For example, all of your sales might be on credit.
Like we established before, poor cash flow can sink a business. After all, you can’t pay wages, bills and expenses with an IOU!
Here’s something you might not have known, however: up to half of all Australian small businesses have negative cash flow.
With our focus on the day-to-day financials, small business bookkeeping is your secret weapon when it comes to monitoring and improves your cash flow, keeping your business afloat.
More specifically, bookkeeping in Melbourne can…
1) Ensure you don’t miss any debts
Debt is part of any business. But it’s not necessarily a bad thing, assuming you keep on top of it!
Proper debt management is an essential part of maintaining healthy cash flow. That means:
- Paying off your obligations in a timely manner
- Not taking on more debt than you can handle
- Leaving yourself a buffer
Small business bookkeeping tracks your business debts and help manage them.
In addition to paying bills and other payables on time, bookkeeping services also ensure that the payment of debts doesn’t cause a cash flow crisis in your business.
Long story short, we ensure that paying off debts doesn’t cause negative cash flow. We’ll also make suggestions regarding credit to hold your debt at a manageable level.
This cuts the other way too – if a lot of your customers are paying with credit, chasing them up is essential to maintaining positive cash flow.
Bookkeepers also provide debt-collection services that will ensure cash continues to flow into your business.
2) Keep track of your cash flow
Expenses and payments directly affect your cash flow. Every dollar that goes towards paying a bill is a dollar leaving your business.
As such, keeping track of what’s going out and coming in down to the individual dollar is a huge part of ensuring positive cash flow.
Let’s say you’re in a rough spot cash flow-wise. This is the worst time to commit to a big ticket spend.
Without proper cash flow tracking, it’s easy to miss something like this and inadvertently push yourself into negative territory.
Ask yourself this: if we were to ask you right now about your cash flow, would you be able to give us an accurate response?
If the answer is “no”, you might need to start paying closer attention. Alternatively, you might need to start looking at small business bookkeeping services!
3) Help organise cash flow management
So you’ve just realised that your cash flow situation isn’t looking too great. What do you do?
Depending on the status of your accounts, bookkeepers can offer qualified advice. Looking at your finances, they can help craft you a strategy that delays or reduces expenses, putting you back on the path towards positive cash flow.
And once that’s done, they’ll help build a system that’ll help you manage your cash flow going forward.
While this is usually the realm of an accountant, your bookkeeper is arguably a better source of information due to their more ground-level view of things.
4) Perform bank reconciliations
As hard as you might try, sometimes your bank statements will tell you different things from your own spreadsheets.
- Cash transactions
- Unrecorded invoices
- Human error, plain and simple
No matter the cause, this can lead to an inaccurate picture of your cash flow. And that can lead to some less-than-ideal decisions.
Comparing your bank records transaction to your books and correcting any discrepancies is a complicated task.
However, it’s essential if you want to enjoy positive cash flow and make the right calls.
5) Create cash flow forecasts
Nobody can tell the future. However, small business bookkeeping in Melbourne can certainly give you a decent forecast of what your cash flow is going to look like!
Using accurate records of your expenses and revenues, your bookkeeper can help you predict what your cash flow is going to end up looking like. This can help you make better decisions and avoid running into cash flow problems.
Improve your cash flow with small business accounting!
Maximum Business Solutions is a bookkeeper in Melbourne that specialises in helping small and medium-sized businesses like yours keep on top of their finances and avoid cash flow problems.
Our mission is to take the stress off your shoulders and let you get back to running your business.