FACT: According to www.businessinsder.com 82% of small business owners experience cash flow problems and 29% go out of business because of cash flow shortages. While most small business owners agree cash flow is the #1 risk for small businesses, many don’t have a cash flow plan in place. Through out next few weeks we will share some tactics you can take on now to prevent running out of cash. But before we begin, let’s start by clarifying that cashflow and profit are not the same thing. Think of profit as “how much money will I make?” and cashflow as “when will I receive that money?” Now that we have that sorted, lets begin by identifying that there are two types of cashflow focus:
- Cash Flow Statement – how much money you received/spent in a particular period. (Not recommended using bank statements, as some expenses / check have been spent but not withdrawn yet, going off of bank statement might be misleading)
- Cash Flow Forecast – projecting your cash position into the future using scenarios.
ACTION OF THE DAY: Find out where your cash flow statement resides. Ask your bookkeeper/ CPA to provide and study it. Ask as many questions as you need to understand it thoroughly. Once you get acquainted with the structure and format, it will be much easier to start developing the cash projections that give you insight into the future and enable you to take proactive action. A few questions to consider as you develop new finance habits:
- Are you keeping track of cash coming in and cashing going out?
- Do you track what expenses are coming up and how will you cover them?
- When was the last time you reviewed (in detail) each expense to understand how they can be optimized or eliminated?
FACT: When Estmere commences working with a new client, in 95% cases our fees are more than covered by finding savings through expenses and identifying the once that are no longer needed or have been forgotten about. Stay tuned for the next ACTION OF THE DAY in the next newsletter!
In the meantime what we’ve found is that some clients are leaping into their plans and forecasts – we’re provided resources to help with this in previous communications.
As always we’re here to help, not to sell you something you don’t need right now. If you’d like help to further understand how to best use this resource, please schedule a free 30 minute call with us here. We won’t try to sell you something, but we will try to help with clarity.
Also, take a look at our previous articles on Business Forecasting here and Cashflow Forecasting here
