Business Cash Flow 101: How to Manage the Money Coming In
When you start out in the business world, educating yourself about cash flow processes can be quite daunting and confusing. As the business starts its growth and money flows in, it can be tempting to think about what you can do with the cash.
However, business operations don’t work this way. Despite the amount of money that comes in, some still have to go all out to keep your business afloat. In this case, you will need to consider your utility expenses, workers’ pay, supplier bills, taxes, amongst a hundred other things. Yes, when you think about it, you have to pay everyone else before you can get a chunk of your share.
How Much of the Money Coming into the Account Can You Actually Keep?
As a business owner, handling your money is something you have to approach responsibly. To simply answer the question, you can only take away a certain percentage from the business account—any small business accountant will agree.
Most accountants suggest keeping various bank accounts for your business and transferring certain amounts per day, week, or month. This will help you have a grip on your finances and stop you from overspending.
By setting aside some cash, you’ll want to ensure that you have funds to pay when bills and fees start to come in. In the end, the list of payments can be quite long, and it will include your income tax, overhead expenses, cost of the goods sold, wages, and other things.
Don’t Forget to Factor in GST
When you prepare your financial profile, don’t forget to consider Goods & Sales Tax in your computation. Yes, it can be a small percentage, but when you counter it with millions of dollars, that can be a lot. You never want to spend money you don’t have—so you have to ensure you add this on into the final computation.
What about Your Loan Repayments?
Most small businesses get the jumpstart they need through loans, and that’s normal. So, after your profit after taxes is identified, the next thing to look at is the loans you have to repay. For the most part, you add on the loans you took—for business vehicles, real estate properties, pieces of machinery, and the like.
Get On Top Of It All with a Cash Flow Forecast
When you look at the numbers to consider, it can be a little intimidating to look at your month-to-month financials. But you can avoid unwanted surprises with a proper cash flow forecast. In this report, you get an estimate of the ins and outs of your business finances.
As our pro tip, it is always best to outsource this need to experts. They have the credentials and experience to help you make sound financial decisions so your business will keep on thriving.
Business finances will always be a tricky thing, especially if you are just starting out. Financial movements can also be way too complex, plus rules and regulations can change within a moment’s notice. With business operations taking most of your time, you don’t need another layer of work to give you stress, and this is where outsourcing your financial tasks is the best option.
Here at New Wave Accounting, we offer end-to-end accounting and bookkeeping services in the Gold Coast for companies looking to scale and grow their business. Get in touch with us today to book a free 30-minute strategy session!