Cash Flow

After seeing some spectacular failures I would like to impart a few tips on cash flow management.

Employing the KISS (Keep It Simple Stupid) principle is my preferred method of cash flow management and I am not just talking about large multinational businesses, I am talking about small Mum and Dad businesses and even personal finances.

First port of call is to have a look at the number of bank accounts that you are running. The more bank accounts you have the harder it will be to track where your hard earned cash is going. Most successful small businesses have two accounts; one for receiving cash and paying bills and the other is a high interest parking account to allocate money required for large and irregular expenses like super, tax, unexpected equipment repairs and rego etc.

Don’t make personal expenditure from your business account. Pay a wage to your personal account and make your personal expenditure from there. This will help to clarify your business transactions and make it a lot easier when you are reconciling your accounts.

Avoid direct debits wherever possible, direct debits are convenient and lull you into a false sense of security. The number of times I have seen individuals and businesses incur bank fees as high as $37 due to direct debits coming out where there has been insufficient funds in the account to cover the direct debit. Life happens, debtors may not pay you on time, banks make mistakes; any number of events can occur that can cause the account to be deficient. The other problem I have seen occur is where people have continued to incur direct debits long after the service has changed or ceased. In one case a bloke continued to pay insurance on a car he had long since sold. In another an internet company was double dipping by continuing to charge for an old plan and the new plan.

Take back control, Jeffrey J. Fox in his book “How to get to the top” says ‘sign all the cheques’. Cheques are out of date but the concept is still very relevant. There are awesome little programs out there like invoice manager from cash flow manager where you can easily plug your bill information into and track your debtors and creditors from this one handy little program. Other people use a diary and a manila folder to organise their up coming bills.

When you get a bill, take the opportunity to have a look at it, ask yourself who these people are and what are they are doing for you and your business. Make sure you are getting the best deal or service. Review your phone, internet and insurance plans at regular intervals.

Finally organise a budget. Most people hate budgeting but it will give you a good idea of where your hard earned cash is going. It also gives you a good idea of what you will need to turnover in order to meet your expenses. There are some awesome budgeting tools around; the understanding money website has a good little budgeting planner both in printable PDF and a downloadable Excel version, follow the link on our website http://www.dasolutions.com.au/links.html.


By Blake Ridler