Is your cash managing you?
or Are you managing your cash?
Let’s start with your bank account – or rather Bank Accounts:
Your Bank Accounts
Feel like you might be stealing from Peter to Pay Paul?
Although this is often said in jest, there is some truth in the saying when it comes to business, and specifically bank accounts that are business (Peter) and personal (Paul)!
The Small Business Maxim for Bank Accounts is:
Business bank accounts are for business. Personal bank accounts are for personal…. And never should the two mix!
Cashflow is top of the list of reasons why so many small businesses struggle … and too many fail. In this a mistake that is made far too often is folk take money out of their business account to pay for personal expenses. The “stealing from Peter to pay Paul” scenario!
Perhaps this is you?
Don’t be embarrassed, it happens frequently that’s WHY that phrase exists!
The number 1 question to consider when it comes to cashflow in your business is “Do you have a separate business and personal account?”
And the number 1 piece of advice I have ……
”Keep your business and personal finances separate”!
The reason why this is so important is often the business cannot actually AFFORD to pay for personal expenses.
Don’t Get Caught at Tax Time!
A story you may have heard over and over again goes like this..
“Once upon a time there was a new business… because there was no income, all the money that came in was spent… on everything….. business and personal!
Everything was great until it was tax time.
“Where do I find the money for this? I was making so much money and now I have none?”
The bookkeeper asked “Where did you spend the money?”
“you know on THINGS”
“Things such as…..?”
WHOA stop right there!!!!
Can you see how easily this can happen? The truth is you NEED to live but you need to ensure your business remains sustainable SO THAT YOU CAN LIVE!
The last thing you want is having to “steal from Peter to pay Paul….”
What is the solution?
Owners should draw a regular salary that the company CAN afford to pay and pay for personal items from their personal bank account! Let Peter pay for Peter and let Paul pay for Paul!
Adopting this essential habit enables you to accurately measure and manage your business expenses, allowing you to ensure that your business remains sustainable!
For many, when they think of being “Cashflow positive” they feel overwhelmed …. WHAT do I need to do? WHEN do I do it? HOW do I do it?
The joy is it IS possible and as soon as you start applying the simple principle of keeping business and personal separate you will be in a position to reap the long terms benefits! AND, these benefits are benefits for “Peter” AND benefits for “Paul”.
Is Your Bookkeeper playing their role
Your bookkeeper should play a key role in assisting you managing your cash by
- Certainty: keeping your records accurate and up to date so you have certainty around where your cash is.
- Plans: work with you to see “where you are, where you want to go and how to get there.” This could be around the purchasing of assets, personal “spoils” or simply reinvesting.
- Pricing: negotiation of prices and terms with customers and suppliers to ensure you are getting the best from both.
- Investing: reviewing all your expenses to ensure you are spending and investing for revenue growth and to support long term business sustainability .
- Margins: work with you on your pricing to ensure you are making enough margin to cover direct costs and overheads.