Control Your Cashflow

Where has the money gone?

“You can read and study all you like about how to be financially successful but at the end of the day the formula is really very simple: What goes out must be less than what comes in.”  Tony Olsen, Director, Flor-Hanly

Many businesses and primary producers make good profits but still end up getting into trouble financially, often failing. Not only does a business need to make profits to succeed, it also needs to manage it’s cash flow to generate cash surpluses over time.

How many times has your accountant told you that you have to pay a lot of tax because you have made a lot of money only for you to reply “if we have made that much money, where has it gone?”

The actual profit a business generates may not actually represent net cash received. You may have made a large profit but it may be all tied up in debtors who are taking their time to pay you.

Profits (or losses) are only one part of the cash flow equation. The cash profit generated needs to fund other outlays such as income tax, owner’s remuneration or dividends, debt reduction, purchase of capital items etc.

The danger is that if businesses spend money unchecked they might find themselves in the position that the cash generated from their operation is not enough to cover outlays. As a result funds have to be found from somewhere else such as additional borrowings. Funding the shortfall with more debt might get you out of trouble one year but if this is repeated year after year the debt will quickly escalate and sooner or later the bank will say “no more”, creditors are cranky and the business is in big trouble.

Not managing cash flow and sticking to the simple concept that what goes out must be less than what comes in, is one of the major causes of business failure.

Managing cash flow is simply about focus and knowing your numbers now.

Flor-Hanly's accountants help clients prepare cash flow projections and monitor actual results against the projections. We meet regularly with clients to discuss their trading results, cash flow position, taxation obligations and strategy to keep them focused. By focusing on your business regularly during the year problems and opportunities can be quickly identified and action taken.

“There are three reasons we can’t do that son. The first is we don’t have the money and it doesn’t matter a dam about the other two!”  T Boone Pickens quotes his father in his book “The first Billion is the Hardest”

Contact our accounting team on (07) 4963 4800 or email to arrange a complimentary discussion on how we can work with you.