Seven Essential Financial Terms: Cashflow by Judith Morgan
I have been invited to teach some Australian business mothers the Seven Essential Financial Terms I think are important they know. Here is my first in an occasional series where I will share those with you over coming weeks
I've put Cashflow at the top of my list of Seven Essential Financial Terms because failing to "manage" your cashflow can kill off your business very quickly indeed. And lack of good cashflow can kill off your enthusiasm for it even faster!
Firstly what does the term Cashflow mean? It means how much money goes into and out of your business every month.
How do you manage Cashflow? You track it on a spreadsheet. First off you predict how much you expect to come into your bank account and when alongside what expenses you plan to pay and when.
It's often easier to plan what expenses you have to pay because you know when you have to pay rent, telephone, salaries and other regular expenses, usually every month or perhaps each quarter.
But do you know how much money will come in and when? This means predicting your income from sales and when you will get paid for each sale.
So this takes us to a very important point. When do you get paid for sales in your business? In my first business, my accountancy business, we would do the work and then, at the end of each month, we would all hand in our timesheets and I would add up all the time we had spent and bill our monthly (accounting) clients. Each quarter there were an additional bunch of bills to be issued as well, to our quarterly (tax) clients.
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