7 Cash Flow Secrets Your Accountant Never Told You

Are you looking for ways to boost your cash revenues?  Is your cash flow alwaysa problem to you?  If you are always “cash strapped” consider thefollowing recommendations.

  1. Follow the money trail.  
    You won’t be successful in business if you omit to systematically track yourincome and expenses as well as record those who owe you money and others who youowe money to.  Shoe boxes are for shoes, not for business records, so makesure you have proper systems in place that enable you to assess at any time whereyour business is at. 

    You don’t need to have big, expensive computerised systems. There are manylow cost programs available today that can do the job very well.  Make sureyou have a system and/or software that will allow you to track every transactionin your business, because without this information you will never know where youare at, or in which direction you are going, or what you need to do to correct anyglaring problems.

    Make sure all records are up to date, especially your cash recording system becausemonitoring your cash situation will be critical.

  2. Be happy when you pay tax.
    Most business owners are absolutely ecstatic when they find they don’t haveto pay any tax at the end of the year.  The trouble with this scenario is thatif you don’t have to pay tax, it stands to reason you can’t be makingany profit. And if you aren’t making any profit, then why are you in business?

    Too many business owners make decisions in their business venture based on the onegoal of reducing their business profitability so their tax is minimised.  Onehas to ask whether it would be far better to make a high profit and pay the taxon it, because at the end of the day you will be left with a greater net incomeand more money in your pocket after the Tax Man has taken his cut

    For most small business owners, what the tax man considers to be profit in the littlebusiness is actually the owner’s pay cheque.  That profit is the netincome after all expenses, and this is used to pay the owner’s salary. How many business owners work their heart out just so they can reduce their takehome pay cheque?  No one, obviously. It doesn’t make sense.  Youwouldn’t put up with this “reduction” from an employer, so whyput up with it now from your own business?

    Never condemn yourself to a life of poverty just to avoid paying taxes. 

    It’s far better to make as high a profit as possible and then use all thelegal strategies and means available to you under the law to minimise the tax youhave to pay on that profit. 

    No one likes paying tax, but everyone likes making money. 

    The bottom line is this; if you are paying taxes, it means your business is makingmoney.  So go out and make more money.  Don’t let the thought ofpaying tax hold you back.  Remember, the maximum tax rate will only be a proportionof the full dollar so you can’t lose. 

    For example, in New Zealand, the maximum tax rate is .39c in the dollar for an individualand .33c for a company.  For an individual, this means you are getting back.61c in your hand for every dollar you make in profit.  So the more dollarsyou make in profit, the more .61c pieces will go into your pocket.  That’ssurely a great result.

    A word of caution:  Don’t increase your profits only to end up spendingit all.  Make sure you plan ahead for the tax on that profit.  Remember,the profit belongs in part to the tax man, so make sure you only spend the portionwhich belongs to you.

  3. Make sure you get paid on time.
    Always get your customers to pay on time.  It’s no use doing work ifyou are not going to get paid for it.  Don’t extend credit unless it’sabsolutely necessary.  As soon as the work is finished, send in your accountand if the account is not paid within the normal payment terms, don’t be afraidto send a letter or statement reminding your customer that the account is due.

    You don’t have to be rude or aggressive.  Just be firm.  Concentrateyour focus on preserving the relationship built up. If your customer or client haslegitimate complaints then don’t hesitate -fix the problems.

  4. Keep your customers close – and suppliers closer.
    Look after the customers who have been with you from the beginning.  They arethe ones who have stuck with you through thick and thin and they will be worth alot of money to while you are looking after their business affairs.  If theywere not satisfied with your service they would have told you so long ago. And as they are obviously satisfied with you, they will refer other businesses toyou regularly.

    There is nothing wrong with looking for new customers, but don’t forget theold ones. 

    Keep in touch with those old ones because they are often a great source of referralsof extra business.  It’s a fact that you can build a successful businessaround a smaller number of satisfied customers by simply providing them with excellentservice and excellent products. 

    Loyal customers will always be “good money in the bank”. They are easierto work with because they know how you operate and how you like things done. It’s far less expensive to keep those old customers happy than it is to findnew customers. 

  5. Watch and use your break even point.
    The break even point is that moment in time when your income equals your expenses. Once you exceed that point you are said to be making a profit.  If your incomeis higher than your expenses - that’s a profit. If your expenses are higherthan your income – that’s a loss.

    Knowing your break even point is absolutely vital, because you must always be awarehow much it is costing you to produce the products or deliver the services in yourbusiness.  If your business is unable to meet its day to day costs plus financially“support you”, you are not breaking even.  Your system should beable to highlight at any time the total number of sales you are making, their valueand the cost of generating those sales.  It is only then that you will be ableto find out what level of sales you need to achieve to cover expenses and how manycustomers you need to sell to, to meet your sales targets.

    If you can’t reach the required income level, you may have to look at howto reduce your expenditure.  Make sure you fully understand what break evenis all about.  It is in fact, a powerful business tool that helps you makedecisions about your marketing, go forward strategy, expansion, staff and pricesto name a few. 

  6. Maintain friendships and don’t burn bridges.
    Everyone has good clients as well as bad clients.  Good clients always cooperate.They are never any trouble.  Bad clients are a continual “pain in thebutt”. They constantly moan and complain and are generally late in payingtheir fees.  Bad clients are always angry and annoying and they will blamefor any delays or mistakes at the “drop of a hat”.  Good clientstake the time to treat you with respect. They extend manners and common courtesiesthat one would extend to any other human being.

    Let’s say both the good client and the bad client ask you for help. Who are you going to “knock yourself out” for? - Obviously the goodclient who treats you with respect.  Is that fair?  Not at all, but youare being human. 

    Take the time to look after folk who provide you with your income. Build bridgesand establish relationships that last.  The more satisfied and loyal your clientsare, the greater will be your cash flow. 

  7. Work with budgets.
    Most people are afraid or too lazy to maintain budgets. “Budgets are our friends”is a saying often heard in the marketplace. 

    A budget is simply a plan.  It helps you to stay on your pre-determined trackand focuses you on what you have to do to achieve something.  If the budgetis a financial one, then the goal is a financial profit.  If a budget is asales one, then it sets out how to achieve your sales goals. 

    Having a budget for your business could be the difference between piloting an aeroplanewith instruments or flying blind in a fog.

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