As a business owner, knowing the financial position of your business is crucial to success and growth.
Knowing the difference between profit and cash really is key to understanding your finances, enabling you to make plans and move forward.
But which should you be paying more attention to, to run your business – profit or cash?
To be successful, you need to have control of where your money is, particularly cash coming in. It’s all very well making a nice healthy profit, but paying your staff and bills becomes difficult if there is no cash in your bank account.
If your customers aren’t paying on time, this flow of cash will inevitably be affected. Plans you’ve made for your business may be delayed, issues may arise and opportunities may be missed.
We’re going to look at how you can pay attention to your cash, so you can celebrate your profit without the fear of an unexpected bump in the road.
Make sure you’re getting paid on time
Money problems are more often than not the top issue for business owners – and late pay is a massive contributor.
Doing whatever you can to get paid on time (every time) will make a huge difference to being ready for upcoming plans or making financial decisions for the future. Getting paid on time means your cash is not sitting in your clients’ bank accounts.
To save time on having to manually check for money coming in and send reminders, we use Chaser to send automatic payment reminders.
Chaser is a software that does what is says on the tin – it chases late payments with a minimal time investment from you. A simple concept which saves a huge amount of time and gets money faster.
Regularly checking in on your business performance so you’re in control of your cash
Running your business without knowing how it is performing is like taking a long hike in the dark without a torch or a map. Businesses are more likely to succeed if their owners know how they’re doing in the present and how to plan for the future.
Using budgeting and cash flow forecasting is the best way for you to be in control of your cash and it doesn’t need to be complicated.
By setting budgets, and sticking to them, you are creating a spending plan which ensures you will have enough money for your outgoings. Budgeting is the basis of cash flow forecasting and keeping your finances in order.
Create a cash flow forecast so you know what you’re going to be receiving and spending
There are different ways to create a cashflow forecast. You can do some digging online for templates and build a spreadsheet that works for you. There are free templates out there but remember, this will be a manual process – you will need to manually enter data each time you want a new forecast.
While these templates may seem appealing because they’re free and editable, this will take a lot of your time – and remember, time is money.
Save precious time with a custom-made cash flow programme
Rather than using an excel sheet for a manual forecast, save your precious time by using a custom made cash flow programme like Float.
Float integrates with your bookkeeping software, and beyond a massive time saving, provides a whole load of benefits:
- You can see changes straight away without spending additional time on manual data entry
Float works seamlessly with Xero via automatic updates every 24 hours ensuring your data is ready down to the day. Using Float eliminates your valuable time being wasted on rebuilding a spreadsheet each time you want a new report. The software also provides a manual sync function so if you have made any new adjustments in Xero since the last automatic sync, at the click of a button, this will be reflected in Float straight away!
Float enables you to:
- Set a cash flow threshold, so you can get notified if cash falls below a certain figure
- Set cash budgets and look back at their performance
- Model scenarios
- Include expected tax payments
- Customise your reports
- See overdue cash expected today
- You can check how your budgets are doing, helping you to ensure spending is on track with your plans
Once you have set up budgets (which is a piece of cake!) Float will automatically update the forecasts with invoices and bills raised in Xero. You can check how accurate your budgets have been using the Budget Variance Report.
- You can simulate different scenarios which helps you to prepare for the ‘what if’s’
Float’s scenarios feature shows the cash impact to help you visualise how potential scenarios or decisions may affect your business. Valuable functionality such as being able to model different hypothetical situations, like losing a client or taking on new staff, and looking back at past budgets all adds to you being able to keep a check on your cash.
- Float gives you all the key insights on one easy to digest overview page, saving you from having to create and read from various different pages
Float only looks at reconciled transactions, another reminder why it’s important to keep your records up to date. The programme enables you to choose which bank accounts you want within the forecast including credit cards providing great insight into accurate spending which will also help with future budgeting.
The overview page gives you a simple interactive snapshot of what you can expect over the next couple of months, along with a view of the highest and lowest cash points to show if there is anything to be concerned about in the short-term such as overdue cash expected today.
The interactive graph allows day by day, weekly or monthly insight into your figures for up to 3 years into the future.
- You can customise your reports, giving you valuable forecasting which helps you make informed decisions and lets you know how your business is doing
Float is easily customisable in areas such as account grouping and expected payment dates. You can customise your reports by grouping certain expense accounts together for easy reading that is meaningful for your business and future budgeting.
Float looks at invoice due dates, so if you know a customer is a bad payer you can amend the expected payment date so as not to skew your reports. Alternatively you can exclude that customer all together. You can play with the reports as much as you like, the data only flows one way so you can be sure any amendments you make in Float will not alter your bookkeeping data.
Make Chaser and Float a part of your team so you can manage cash and grow your business
When you’re a Fresh Financials client, Xero is the foundation of everything we do and we employ Chaser and Float as part of our team too.
Having these programmes as part of your team means you can focus more of your valuable attention on your client experience and on growing your business.
If you’re not a client of Fresh Financials, check out our fresh approach to bookkeeping and how we introduce you to the best tech to help you enhance efficiency, improve decision making, and get you closer to your numbers.