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Business by design Part 2: Cashflow – lifeblood of a successful business

Clear Vision • Sep 27, 2016

ASIC’s business insolvency statistics suggest that inadequate cash flow or high cash use is the most often cited reason for a business failure.

So does that just mean they didn’t make enough money?  Or they couldn’t sell enough products or services?  Not necessarily.

Designing a successful business and achieving good cash flow is a lot more than just trying to sell as much of whatever product you have as possible.

At its simplest cash flow is just the movement of money in and out of the business.  But successful cash flow management involves knowing how the money moves, when it comes in, when it goes out and when potential problem times will arise.

So choosing the business by design approach what proactive steps should we take with cash flow:

Work to your peaks and troughs

Knowing your business has peaks and troughs in cashflow but just pressing on and hoping the troughs don’t get too deep at the wrong time is a recipe for disaster.  Work with your accountant or chief financial officer to understand how cash flow varies in your business.  Everyone is unique.  If you can, design payments for peak periods and minimise expenditure during the troughs.

Talk to your bank

Your bank wants you to succeed.  Get them on board by making sure your advisor knows exactly what cash flow means for your business.  Will money get tight at the end of each month?  Does it fluctuate with a few big sales during the year so you may need to increase an overdraft in the dry periods?  The more you talk to, and work with, your bank the better value you’ll get from this relationship.

Pay with what you have…not what you hope to have!

Many business owners are overly optimistic about future sales and also too eager to pay out creditors or invest in new projects when the money just isn’t there yet.  Avoid extending a line of credit or putting the squeeze on cash flow when you can simply delay the expenditure until you have the money actually to hand.

Invest in good advice

Clear Vision loves talking about cash flow.  Particularly when clients want to take proactive steps to managing and improving it.  Whether it’s us or someone else the value of good advice, sought early, to the success of your business is immeasurable.  We’ve seen hundreds of different business models.  We’ve seen them succeed and unfortunately we’ve seen them fail.  Invest in good advice and you’ll benefit from that experience to maximise your chances of success.

Don’t spend what you already owe

The delay between when money comes into a business and when you have to pay your GST and PAYG instalments causes problems for many businesses.  The right advice can keep these payments to the legal minimum but eventually the tax man must be paid.  Whether you simply keep some aside from every sale or design your cash flow so you can dedicate receipts at a particular time to tax payments you need to be ready.

Embracing the Bright Side: Finding Joy in Everyday Moments

By Caroline Gillies • 07 Mar, 2024
In a world that often feels chaotic and uncertain, it's easy to get caught up in the hustle and bustle of life, forgetting to pause and appreciate the simple joys that surround us. But amidst the challenges and hardships, there is always a glimmer of light waiting to shine through the darkness. Today, let's embark on a journey to explore the uplifting and positive aspects of life, reminding ourselves of the beauty that exists in every moment. Gratitude: A Key to Happiness Gratitude is a powerful tool that can transform even the most mundane of days into something extraordinary. Take a moment each day to reflect on the things you're grateful for, whether it's the warmth of the sun on your face, the laughter of loved ones, or the beauty of nature. By shifting your focus to the blessings in your life, you'll find that joy naturally follows. Embracing Imperfection Life is messy, unpredictable, and imperfect – and that's what makes it beautiful. Instead of striving for perfection, embrace the flaws and quirks that make you unique. Celebrate your successes, no matter how small, and learn from your mistakes with grace and humility. Remember, it's okay to stumble along the way – it's all part of the journey. Finding Joy in the Little Things Happiness doesn't always come from grand gestures or monumental achievements. Often, it's the little things that bring the most joy – a kind word from a stranger, a hug from a friend, or a quiet moment spent watching the sunset. Pay attention to the small moments of beauty and wonder that pepper your day, and you'll find that happiness is never far away. Spreading Kindness and Love In a world that can sometimes feel cold and indifferent, kindness is like a ray of sunshine breaking through the clouds. Make it a priority to spread love and positivity wherever you go, whether it's through a simple act of kindness or a heartfelt compliment. By lifting others up, you'll find that you lift yourself up in the process. Cultivating Inner Peace True happiness comes from within, rooted in a sense of peace and contentment that transcends external circumstances. Take time each day to nourish your mind, body, and spirit – whether through meditation, mindfulness, or simply taking a walk in nature. Cultivate a sense of inner peace that will sustain you through life's ups and downs, allowing you to navigate challenges with grace and resilience. Embrace the Journey Life is a journey filled with twists and turns, highs and lows, but it's also a journey filled with beauty, wonder, and endless possibilities. By embracing the bright side of life, finding joy in everyday moments, and spreading love and kindness wherever we go, we can create a world that is a little brighter, a little kinder, and a little more beautiful for us all. So let's embark on this journey together, with open hearts and open minds, ready to embrace all that life has to offer.

Boosting Your Superannuation: Seven Powerful Strategies

By Caroline Gillies • 22 Feb, 2024
Boosting Your Superannuation: Seven Powerful Strategies

Changes to Company details and ASIC – How to avoid a fee

By Caroline Gillies • 19 Oct, 2023
When it comes to being a Director of a company, there are administrative requirements that must be complied with, including keeping ASIC in the loop. We all hate paying unnecessary fees, and ASIC loves to charge fees. To avoid late fees, ASIC must be told about any changes to company details, including your business or residential address, within 28 days. If your company's information changes, please let us know so we can notify ASIC on your behalf. Example: Jarryd gets a late fee Jarryd recently moved his company to a new storefront. In the rush of changing to his new principal place of business, he forgot to update his address details with ASIC. A month later, Jarryd logged into his online account to change his address to reflect the address of his new principal place of business. Because it was outside the 28 day timeframe, the company was charged a $93 late fee. If he had waited longer and lodged the change of address more than a month late, the company would have been charged a $387 late fee. To avoid fees in the future, Jarryd realises it's important to update his details as soon as they change. In summary, be like Jarryd and realise the importance of advising Clear Vision Accountancy Group of any changes. Example supplied by ASIC
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