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Mapping your cash flow

July 2013

It's a business mantra: cash flow is one of the most important things to get right in your business. The increase in business failures since the GFC has frequently been attributed to cash flow shortfall and delays in getting paid by customers. Running out of cash isn't just a small business issue either – even some of the largest businesses have failed because of cash flow problems.

Cash in
Understanding your cash flow needs is vital, particularly for high growth business. As you're looking ahead to the 2013/14 financial year and planning your budgets, it's a good time to be looking hard at how cash enters and leaves your business.

Given how critical cash flow is to business sustainability and growth, some of the key questions to ask are:
  • How long does it / will it take your customers to pay you?
  • How much stock do you need to hold?
  • What are the payment terms required by your suppliers?
  • Where do the major expenditure commitments lie in the year ahead?
Cash out
Other important planning considerations include remembering to allow for things like tax payments, loan repayments, dividends and any capital purchases that are planned. These can be 'big ticket' items and if you don't allow for them then you will get caught out.

As part of your cash flow forecast identify your capital expenditure requirements. Don't deal with these on a one-off basis as they arise, plan them in advance. Working with your accountant can help you time your expenditure for a better tax position too.

Contact us on 02 9957 4033 to discuss how to better plan and manage cash flow in your business.

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Last updated July 2013. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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