One of the biggest pain points for business owners is cash flow, or the lack of it!  Unfortunately, net profit doesn’t always equal money in the bank.

There’s a number of reasons why there’s no money in the bank, even though I tell you that you’re making a profit.   Here’s a few common reasons:

  • You’ve paid loan repayments;
  • You’ve paid quarterly PAYG Instalment tax payments;
  • You’ve paid Owner’s Drawings

These all use up your money but aren’t “expenses” so they don’t reduce your Profit.

The most common reason is Outstanding Debtors (ie customers that owe you money).  These invoices are recorded as Income (ie Profit) but the money isn’t received yet.

It’s important to have a structured Debtor Process to try to minimise the impact on your business.  Here are some options:

  • Follow up late Debtors every Monday via email.
  • Set up an auto-reminder in your software. For example, Xero will email a Statement to your debtors once they are past their due date.
  • Link an Add-On software to your accounting software. For example, Debtor Daddy will let you customise your reminder emails depending on how overdue they are and will automatically email clients per your set-up instructions.

Another option to ease cash flow problems is to pay expenses on a monthly as smaller, more manageable amounts.  From 1 July 2018, you’ll be able to pay our fees over 12 monthly instalment amounts between July 2018 and June 2019, rather than as one annual payment.  We’ll be contacting all business clients over the next few months to discuss whether this option will be more beneficial to your business.

We’ve also introduced new service packages to help you stay on top of your business finances and cash flow:

XERO BOOKKEEPING PACKAGE:  designed to give you back more time, and reduce bookkeeping stress!  Download the details Xero Bookkeeping.

BUSINESS SERVICE PACKAGES:   designed from The Contractor through to The Grow My Business package.  There are 4 packages with various inclusions for all stages of business.  Download the details Business Packages.

TRADING STRUCTURE REVIEW:  we’ll always tell you if we think it’s more beneficial for your business to restructure.  This service is designed for NEW business clients.  We all have that friend that is sure they are paying too much tax.  If you have that friend, please share this blog with them or download the details Trading Structure Review.

If you want a personalise quote or need help organising your business cashflow, give me a shout!

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