Cash is the essential ingredient for Business Growth

November 12, 2015

Small business owners are often too busy to stop and take note of the key information needed to sustain and more importantly grow their business. If they do take the time to review their financial information it almost always involves looking at a Profit and Loss or revenue statement. This is often because it is the easiest report for most people to understand and follow.  What is often ignored is the Balance sheet and most importantly cash flow statement.
The Three main financial reports include:

  • Income Statement(profit and Loss)

  • Statement of Financial Position (Balance Sheet)

  • Cashflow Statement(Showing flows of money in and out of the business)

Understanding how the three main reports work together to give a real picture of how the business is travelling and whether there is enough money to pay existing operating commitments and then finance business growth is essential to good financial management practices.
7 ways to increase cash in your business

  1. Increase Price of goods or services

  2. Increase the volume of sales or services delivered

  3. Reduce Cost of goods sold - the price you pay for raw materials and direct labour.

  4. Reduce operating Costs – overhead costs

  5. Collect from your Customers faster (ie 7 -14 days)

  6. Pay your Suppliers on longer terms (ie 30 days)

  7. Reduce the amount of Inventory or stock on hand

If sustainability and growth is an important issue for your business then it is important that you come to grips with the key information contained in your financial reports.  Firstly ensure that your financial records are regularly kept up to date and that you can depend on the information contained in them.
It is important that you have an accurate and systematic recording process for all of your day to day accounts.  It is the old adage of “rubbish in, Rubbish out”. So, to ensure that your financial reports are reliable, make sure that the person entering your accounts is following the correct procedures.
As well as accuracy, regularity is essential. An adhoc approach to updating financial records reflects an adhoc commitment to your business. Make sure you have a regular review of accounting information and reconciliation of bank accounts and other relevant accounts (such as tax and employee amounts payable) to ensure that you can act quickly on any irregularities.

Once you have a good recording system happening, determine what reports you need to assess your current position. What is the information that you need to ensure that you are staying on top of your required cashflow. Remember – cash is the blood flow of your business. Any blockages will result in massive disruptions to your business and can result in certain death if not attended to in a timely manner.

Learn how to identify the key figures to sustain your business profitability and fuel the future growth of your business and prevent blockages by better understanding your financial reports.
Next 1 day course - Understand your financial reports 27/11/15 $330 includes lunch and materials.
Contact us at training@basagency.com.au to book your place NOW.

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