Track your cash

Posted: 7 Apr '22
Track your cash

Track your cash

We are regularly asked by small businesses what they can do to improve their financial position. Here are 5 quick fired simple answers you can do today. Not surprisingly, they are all about knowledge and data.

1. How much business cash are you spending on personal items?

The fastest way to lose track of your business profitability is to start financing your life from your business coffers. Firstly, dude, that’s not your money. Secondly, you could be causing yourself tax headaches at year end. It’s much easier to pay yourself a salary and separate your finances.   

2. Are your clients taking longer to pay you?

If the answer is “Yes”, you may have a problem. On average, the longer customers take to pay, the more likely you are to have bad debts and the less money you have in your bank account to pay your bills. Stay on top of it by giving them different payment options like credit card and Paypal or find a persistent but polite debt collector to chase, chase, chase. It’s your cash, get it in the bank fast.

3. Do you have more cash now than you had a month, quarter or year ago?

Take all of the cash in your bank accounts and deduct any credit card balances. Let’s keep it simple and for now, ignore any long-term loans. It’s a good sign if you have more cash this year than you had last year. If you don’t, don’t panic, can you explain why? If you made a big purchase or an investment, that’s fine. But, if you are going backwards for no apparent reason, you may need to change something fast. Tracking cash over time can open your eyes to dangerous trends.

4. What is the total you have outstanding for payables?

You should be regularly checking what you owe and to whom so you can meet your obligations. As a minimum, you should be putting aside cash to cover your payables. Payables include things like GST, wages left to pay, super to pay and any PAYG deducted from employees’ wages. All that lovely loot is spoken for so, the easiest way to ensure you don’t spend it, is to put it in a separate bank account. It will help you sleep at night knowing you have the cash to fork out when the due date comes around.

5. Do you have enough cash right now to pay everyone?

If you take the cash amount you calculated in step 3, add it to the total owed to you by customers in step 2 and deduct the amount you owe in step 4, you come up with a Nett Cash number. If it’s positive, good. If it’s negative, not so good. You need to work out where you can find some more cash. Yes, you can spread some payments out over time. But in general, small businesses want to move to positive cash positions.

You should be able to answer all of these questions quickly and easily by looking at your accounts. If you can’t, you may need to be ‘Appy-fied’. Give us a shout. We’d be delighted to help you find the answers.

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