CASH FLOW - THE BUSINESS LIFEBLOOD

Over the years we’ve seen people do very well, but we’ve also seen people struggle to pay bills on time and in some cases behave irresponsibly with money they bank. Most businesses face cash flow issues from time to time. Because of the nature of your business where cash is collected in full each week, and your main expenses are proportional to your collection, theoretically you shouldn’t have a cash flow problem. If you are facing a cash flow issue, there’s no sugar coating it - it comes down to your financial planning skills. Shortage of cash in this business is usually caused by one or two things:

1. Drawing too much from the business for personal use.

Solution – improve the business turnover, reduce your personal expenses or get another income if you absolutely need that money, otherwise stop. Don’t expect the business to support more than it’s capable of. In most cases it is part time.

2. Repaying principal on loans too rapidly.

Solution – renegotiate repayments with your lenders so that you pay a minimum weekly amount and can do lump sum reductions. Pay it weekly if possible rather than monthly to smooth it out.

3. Not accounting for big tax bills and getting hit by them unexpectedly.

Solution – put some money aside into a separate account each week.

Payment Priorities

Always pay people in this order:

• Monthly or fortnightly bills to current suppliers. If you order it, you should pay for it on time.
• Long term loans P & I (after getting the lowest weekly repayment terms).
• Savings account for tax.
• Yourself for living expenses.
• Buying new machines – if you have potential in the area the money is better spent buying more machines than lump sum loan reductions.
• Lump sum reductions on loans.

If you want to be a successful business owner or as a lessee, please put a lot of attention into your financial management. If you have problems, talk to your support office and we can help with setting up a cash flow spreadsheet.

Further information: