Most Accountants have a page on their website or marketing brochure telling you the type of services they offer. But how many people actually understand the jargon and what these services involve, let alone whether they need them or not? In this blog series we explain exactly what these services are and how they can benefit you.
So how can ‘Cashflow Advice’ from your Accountant help your business?
It’s an interesting fact that the majority of businesses that go broke are often profitable; however they run out of cash. How many people truly understand the difference between business profit and their cashflow and can effectively manage this? By developing a working cashflow spreadsheet businesses can effectively plan for cash coming in and cash going out and control the timing of these transactions to ensure they don’t have cashflow deficits.
Take for example Bobs Kitchens who purchase kitchens at wholesale and supply to builders. If Bobs Kitchens purchase stock on day 1 and the supplier invoice is due to be paid in 30 days (outgoing money), on day 15 they sell the stock to a customer and issue an invoice that is due for payment in 30 days (incoming money). This means that for 15 days Bobs Kitchens will have outlayed working capital to purchase the supplies without being paid. Bobs Kitchens therefore need to ensure they have available cash to cover the imbalance or review their customer payment terms so they are not out of pocket for such an extended period.
If you are unsure of where to start in developing a working cashflow for your business it is important to seek assistance from your Accountant. Having a cashflow plan for your business can be THE most powerful tool you will utilise.