Cash flow basics – video transcript

In this Cash flow basics video, learn how to manage the money coming in and going out of your business.

Not having enough money is one of the biggest reasons small businesses fail.

Think of cash flow as the fuel that keeps your business running.

It's the money coming in and going out.

If you generate more revenue than expenses, this indicates good financial health.

For example, Lucy is the owner of a flower shop. If Lucy's revenue exceeds her expenses, she can pay her bills on time, pay her employees and herself, put money back into the business so it can grow and improve and invest in her superannuation fund.

If you are looking to improve your cash flow, you can take 4 basic steps right now to help your business thrive.

1. Track your budgeted revenue and expenses against your actual revenue and expenses. This will help you monitor your cash flow and notice any potential cash flow problems before they occur.

Use accounting software or a spreadsheet regularly to help you calculate budget forecasts and expected cash flow for future months. This will show you where you might not have enough cash to pay all your upcoming expenses.

2. Make it easy for your customers to pay you.

You can do this by invoicing customers quickly, providing clear payment terms, offering multiple payment options and monitoring upcoming invoice payments.

3. Keep on top of your expenses by securing the best rate from providers and suppliers, paying expenses on the due date, managing staff wages by rostering less staff in non-busy periods and keeping your business and personal bank accounts separate so your business costs are easy to track.

And 4. If you're a business that relies on stock, be sure to monitor and review your stock levels regularly.

Too much stock can tie up your cash or leave you with unmoveable stock, and too little can impact customer demand and leave customers empty-handed.

So, to keep your cash flow moving in the right direction and fuel your business for success remember to stay on top of your monthly budget, make it easy for your customers to pay you, keep on top of your current and future expenses and monitor and review your stock.

If you need more help on managing your cash flow, talk to your accountant or financial adviser or visit the Business Queensland website.

Watch the Cash flow basics video.