No one said running a business would be easy but getting the basics right helps you stay in control. Having your finger on the cash flow pulse as well as working on your budgeting plan both serve a very useful purpose - keeping your business financially healthy.
Discover what good cash flow management looks like and why you need a budget in your business life, it comes down to following a few basic rules.
1. Why have a budget?
A budget is a plan for you to be able to compare income with outgoings that need reviewing and measuring regularly. It’s helps you make sound financial decisions around costs such as rent, wages, supplies etc.
2. Who uses a budget?
Banks like it when a business owner is able to show a budget plan, review of plan and positive actions taken to ensure good financials in a business. Those positive actions could show where a new supplier has been engaged due to better wholesale pricing or negotiations taken place with a current supplier so best price has been procured. It helps banks read whether allowing access to funds is financially viable for them as well as to the business owner.
3. How does a budget empower the team?
If you want your team to take ownership, you have to share certain key information and that can include budgets. It helps them to make the right decisions on their own by understanding what they do has a direct impact on the bottom line. Being able to show how this has the potential to positively impact their financial health or ways you can afford to invest in their career growth are both motivating and rewarding for both parties.
4. How quickly do you send your invoices out or chase debt?
Sending your invoices out immediately helps with cash flow as well as providing all the correct information such as the right purchase order and correct contact and invoicing details. These are key to getting your invoices paid on time. Chasing debt the minute it is overdue means you’re at the top of the list to get paid. If you have done the first steps correctly then there’ll be no excuse for late payment.
5. Too much inventory on hand?
Too much stock on site means you have less in your bank account. Ways to manage this properly in the future includes actions like fine-tuning your forecasting, being able to run financial and inventory reports that show historical and seasonable comparisons that also help you track stock levels at all times.
You can’t fix what you don’t measure so getting back to basics with a sound budget to follow, running regular financial reporting and keeping your finger on the cash flow pulse allows you and your team to make informed decisions. They all arm you with vital insights into running a successful business.
Why not book a coffee with your RightWay Business Partner where we can show you how to improve cash flow and get your budget sorted once and for all?