Thoughts on Cashflow for Businesses

With the ongoing restrictions throughout Australia by government authorities to curb the spread of COVID-19, many businesses have suffered during this time. As we touched on a few months’ ago, there are government grants to support businesses that have had a downturn in revenue and we recommend that you talk to us about what may be available to you.

Now is as important as ever to consider your cashflow situation. Here we consider a few thoughts when looking at your cashflow.

How long will your cash last?

Its important and often confronting to understand how long your cash will last. With many businesses running negative cash flow each month (your expenses are greater than your income) you need to know the amount of time a business has to stay afloat without extra capital. If you have say $50,000 in the bank & you need $10,000 each month to run your business than you have 5 months to continue to operate your business without any extra cash.

Why is this important:

1.    It gives you an opportunity to review the financials of your business, make adjustments to your expenses & lower the amount of cash you need each month.

2.    You have time to seek additional capital before you run out of cash

3.    It enables you to get on top of your finances

Why businesses use up so much cash?

Income:

First of all lets look at the income side. Its one thing to invoice but its another to have your invoices paid. In this situation we are looking at actual cash received and during tough times some of your customers may be a bit slow to pay. When you plan ahead for incoming cash make sure you have a bit of a delay on payments to take into account this situation.

Expenses:

On the other side of the equation even if your income is down significantly many expenses don’t change like rent & electricity. Then you may also still need to pay employees, suppliers etc. This is the most challenging part of businesses suffering as there tends to be a domino effect where suppliers, businesses & customers all slow down their payment timing making cash flow more difficult.

Cash flow forecasting

Its not all doom & gloom for clients though. Some of our clients are having an exceptional years & while their cash flow may be a bit lumpy (paid irregularly), the income coming in is much greater than the amount that needs to go out.

 Good situation, tough situation or otherwise, we highly recommend that you are constantly looking at your financial situation & in particular your cash flow. The most successful businesses have what we call a strong cash flow & manage their customer & supplier relationships particularly well.

Our Cashflow Expertise

We have been providing financial support to our clients for a number of years and understand the importance of cash flow. We can:

·         Provide you with the tools you need to understand your cash flow

·         Have a look at your current situation & talk you through what we think is best for your business

·         Organise to meet up on a regular (quarterly or bi-annual) basis to keep on top of your cashflow situation.

Sit down with Hunt & McTavish to assist you in getting on top of your cashflow & stay ahead of your business. 

Give us a call today on (02) 6942 4932.