Cash Is King

Understanding your cashflow is critical to the success of your business. A business is not bankrupt even if it has Liabilities which are greater than their Assets provided that they can still pay their bills on time. However if you cannot pay your bills you are considered bankrupt even if your Assets are greater that your Liabilities. Is it any wonder that “Cash Is King”.

One of the biggest problems for start up companies is failing to ensure that they have adequate cash to cover the unexpected. (Tip:- If you are a business startup, some experts recommend that you should double your original estimate of expenses and expect your income to take twice as long to come in.)

Banks will quickly close down a business that runs out of cash. The Tax collector is another that will close you down if you fail to pay your taxes. Unfortunately, lenders do not look upon a business favourably if the business has failed to predict an upcoming cash crunch and have not pre-arranged finance. You need to set up borrowing facilities when you don’t need them.

Can You Answer These Cashflow Budgeting For Business Questions?

• What happens if a key customer delays payment by a month?
• If sales were to go up 30% does the business have enough working capital?
• Do I have enough cash for that extra vehicle or do I need to finance?
• Do I have enough cash to cover the Christmas holidays or next Tax payment?
• Can I pay myself an extra $500 per month?
• How many businesses reject an order because they know that they will not have enough labour to do the job, or don’t have enough capacity but never consider that they may not have enough cash to do the job?

All these questions can be answered if you have a good cashflow budget. So if “cash is king” then how can I get better control? The answer is to set up a Cashflow Budget For Your Business.

Cashflow Budgeting For Business

Balancing a cheque book is a simple form of cash flow management. Similarly, reconciling a bank account is a skill required by most accounting packages. So if you can do both these tasks then you are well on your way to Cashflow Budgeting For Business Success.