For business growth, positive cash flow is crucial. However, cash flow issues can prevent your business from growing. The cause of cash flow issues may vary from one company to another. That’s why it is advisable to choose bookkeeping for small business so that a bookkeeper can manage the cash flow of your company.
What are Cash Flow Problems?
Cash flow issues occur when a company doesn’t have liquid cash to cover its liabilities. When cash outflow is more than cash inflow, businesses may face difficulty paying debts and other expenses. Cash flow issues arise from problems with invoicing and collecting payments, low-profit margins and over-investing in inventory.
What Issues are Faced by Businesses with Cash Flow Issues?
When cash is not enough, it can affect businesses in various ways. Checking statements will give you an idea about how much is moving in and out of your business. If the figures show that your income is more than your spending, it means you are doing great. If the reverse case, it will indicate that there is negative cash flow and you need to keep an eye on it. Cash flow shortage can lead to:
- late payments to suppliers
- missed or late paying debt repayments, leading to decreased credit ratings
- taking more loans to cover business expenses
- negative effects on marketing strategies
- unpaid wages
- reduced customer satisfaction
- business closure because of insufficiency
It is crucial to understand how and why cash flow issues arise so you can identify them before they impact your business.
How to Fix Cash Flow Issues?
Every small and big business needs the support of a professional bookkeeper who can help the business grow. This is the reason why companies rely on bookkeeping services in Melbourne. You need to be aware of what’s happening in your business so you can make the right decision for your company. The following are a few things that a bookkeeper does to help you improve your company’s cash flow.
- Cash Flow Forecasting
Bookkeepers follow a straightforward approach and create a cash flow forecast that includes the estimation of the income and expenses on a monthly or quarterly basis. Cash flow forecast enables effective management of liquidity that ensures that the company has sufficient funds to meet obligations and monetary needs. The cash flow projections give an idea of the cash that will flow in and out of business at any given time, allowing businesses to make informed decisions.
- Invoicing Effectively
Positive cash flow management requires the inflow of cash to keep flowing daily without any delays. The bookkeepers are responsible for maintaining the receivables by sending out invoices when the deliveries are made to the customers. The terms of payments are mentioned on the invoices. The advance payments offer ensures that cash inflow is greater than cash outflow.
- Bank Account Reconciliation
Bookkeepers frequently reconcile bank accounts as bank reconciliation allows them to match the bank statements with the records in their business books. It helps them identify any discrepancies in the business books that can occur because of cash transactions, mistakes in calculations and forgotten invoices. It gives you time to correct the records before lodging reports to the ATO to avoid penalties. Bank account reconciliation also helps you find any fraudulent activity and accounting errors that should be controlled.
- Record All Financial Transactions
Professional bookkeepers keep an eye on the cash flow of a company to track accounts payable and accounts receivables. It ensures that all financial transactions are recorded accurately. A bookkeeper will check whether the amount on the cheques matches the amount in the accounts or not. They use a record-keeping system that ensures more accuracy and increases efficiency. Accurate record-keeping is crucial to preparing and lodging a tax return. This accuracy can help your tax accountant in Melbourne prepare and file taxes on your behalf without any delays.
Conclusion
Now you know how you can improve the cash flow of your business. You can get Reliable Bookkeeping Services for your business so that a bookkeeper can keep an eye on the cash flow of your business. We can help you with business growth and cash flow management.