Cashflow – Do I Really Need One?

There is an old Saying in business – “Cash Is King”. It has been around forever and is still as true now as it was then. In fact, it is one of the most important things to do in your business. So, please give it the respect it deserves …
Let’s get into it …

Do I really need to do this?

Yes – you must absolutely do a Cashflow. No, it isn’t done in your head, or looking at you’re online banking. Never be cash poor – it literally can end your business. So given this importance, it is a wise business owner who will make sure the cashflow is done.

Cashflow – how hard can it be?

A Cashflow isn’t that hard to do. If you have some spreadsheet skills you can do your own. Alternatively, you can look online and get a good one for free. So, what should your cashflow look like. It must be day by day and for say 2-3 months. Yes, it must be that detailed – anything less and it won’t make you analyse your cashflow accurately. And also, almost everyone will be doing their BAS quarterly and so your Cashflow must be at least for a 3-month period to include that.

Get your bank transactions by downloading a CSV file from your online banking – all banks have this facility. Open the now downloaded CSV file with Microsoft Excel. Make sure to do “save as” in an Excel Workbook file.

  • Start to look at what your Expenses and Income looks like, and when do they occur?
  • Look for the patterns – you’re going to replicate these onto your cashflow.
  • Start to plug in the numbers by cost and income on to your Cashflow spreadsheet.

Plotting the costs and incomes out along you cashflow will start to tell a story. If you find a slump appears in your cashflow then it’s not great, but you can start to plan for it. You could, say, get an overdraft in place, or save in the good times knowing you’ll have the funds when things slow down.

I have done cashflows for many, many years. I know many businesses who make good money at the end of the year - say in September through to the end of November. Things are good, the business is going well. Then there is the Christmas break and before we can say “cashflow” the slump is really starting to appear mid-January and early February. And, it can even be March before the cashflow starts to pick up. By this time the owner is really starting to stress. This scenario is not uncommon. And for this example, and for others, it’s a good opportunity to measure how many times you are in a healthy cash positive position – it can sometimes be a real eye opener.

Do you need help?

If you can’t do the bank CSV download, do the setup in Excel, and save it for use then give me a call. It isn’t that hard and can be done for a very small cost.

Getting the Cashflow setup and working isn’t that hard either. I’d recommend you spend some of your administration dollars and get me to get this right for you. Yes, I’m here to promote my business, and it’s a good way for you and me to connect on a small budget item for your business. I would very much like to work with you. Spending a small amount here is a gateway to see what you can achieve with a Business Advisor.

Does Accounting Software do a Cashflow?

Yes, almost all accounting software packages do a Cashflow, at least the major ones do. You can certainly try this option, but I recommend you don’t. Part of the Cashflow is for you to work with your cash, get to know it, understand the valleys and the peaks. Maybe recognise there are too many valleys and you need to address that. In some instances, your cashflow may be in great shape – so, is it time to grow, expand? I’ve written a number of Blogs (articles) that look at some of the areas you may need to be looking at so go take a look at those.

Budgets and Business Plans – are these connected to the Cashflow?

Absolutely your Budget and Business Plan sync with your Cashflow.
If you’re really not into Budgets and Business Plans – and you don’t need one for external parties like banks – then reluctantly I would say you could focus on just doing a Cashflow. In a way your Cashflow may approximate your Profit and Loss, and also some of your Balance Sheet. But before I lose you talking about these, let’s just put those aside for the time being and look at your Cashflow. It is easier to understand and for almost all business owners it is far easier to do and manage.

Summing Up

Far too many business owners don’t give their financials and supporting documents like the Cashflow the due attention they deserve. Failure to do these is very high in Australian businesses and can lead to business failures. I’d strongly recommend you search “why do businesses fail” – businesses that do not knowing their numbers is one of the biggest causes. On the other hand, the businesses who are savvy and commit to the cashflow, and more, are the ones who succeed and prosper.
Give me a call if you need to get things rolling with your Cashflow – we can also arrange for an online video meeting if that is an option you’d prefer. And remember – Cash is King.

About Author

Greg is an experienced Business Advisor with more than 15 years of industry experience focusing around various services such as Business Strategy, CFO Online and business specialist. He is also an experienced business coach.

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