Every business’s survival is dependent on having enough cash in the bank.
People don’t spend enough time planning and making sure that they are aware of the cash inflows and outflows throughout the year.
A large contributor to this issue is not getting paid on time by clients. Not having the time to chase them up.
Using accounting software such as Xero is a great start in tracking your overdue invoices.
Most reputable systems can also be set up to automatically send reminders.
Clients who are getting overdue reminders every few weeks will not be able to easily forget their bills.
Offering alternative and easy payment methods also assists in getting paid quicker.
If you connect your accounting software, you can get alerts straight away when a payment has been made.
It is also important to have a clear view of when your compliance obligations are due.
It is reassuring to know that you are ready for your super or BAS payments when the due date arrives.
Even better, you could arrange a payment plan in place to cover older debts.
Deferring older tax or super obligations to a future date can leave you chasing your tail and make you not feel in control of your money.
The best way to plan for these is by having separate bank accounts for different spending needs.
How many business bank accounts do I need?
At a minimum, businesses should have three accounts.
First is the tax account where you allocate GST, income tax, PAYG, super amounts on a fixed regular basis.
The second bank account would be an operating expenses account where your known expenses such as rent, wages etc are set aside.
The third is your everyday business account, which is where your customer pays you and should essentially represent your spare money.
These allocations across accounts can get complex, so the team at Tier Accounting are always here to help refine this process to maximise the benefits.
Stay ahead and know your true cash flow figure
Most small businesses have trouble understanding what their true cash figure is and what they can spend without dipping into cash that is needed for future expenses.
This is where cashflow planning is integral in assisting growth and allowing businesses to make informed decisions with confidence.
Know and understand your numbers.
Contact Tier Accounting for a free cashflow catch up to see where we can help.
Tier Accounting is a Chartered Accounting firm servicing Bayside, Mornington Peninsula and greater Melbourne across accounting, bookkeeping, business partnering, cloud set up and support and marketing.