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7 Ways Your Accountant Can Help You Improve Your Cash Flow Management

There is an oft-repeated saying that, in business, amateurs are concerned with profits and losses, while veterans focus on cash flow. Though this viewpoint may be a bit simplistic, it does ring true for many businesses. In most cases, you would much rather have some cash coming in at all times rather than be on a never-ending cycle of feast and famine.

As a rule, the longer the periods where a business has low or negative income, the bigger its risk, regardless of how much profit it turns. A lot of bad things can happen in the period between positive inflows, and being caught without an income can seriously hamper your operations. This is especially true if, like many New Zealand-based small businesses, your company only has modest savings.

cash on hand

Cash flow is important for another key reason: credit. Stronger cash flows mean better credit ratings. This is no small thing, as your business’s creditworthiness also has a major impact on its survivability and its appeal to investors.

Unfortunately, not every business owner has the skills or time needed to effectively manage their cash flow. In these cases, a professional accountant can be your trusted guide in keeping the money rolling in. Let’s see how Dunedin accountants like the people from Target Accounting can help you stay on top of your cash flow:

1. Budgeting and Forecasting

Your accountant can help you make sense of your financial data, providing the perspectives needed to make an accurate forecast as well as a budget based on it. Just remember that not all accountants are necessarily equipped to do this sort of work, as proper financial forecasting requires serious upskilling. For the best results, you should engage with a company like Target Accounting, which specifically handles these activities for small businesses.

2. Creating Capital Expense Analyses

Accountants are useful for helping you make informed decisions about big-ticket purchases. Let’s imagine that you’re running a café and you’re thinking of investing in a new espresso machine. Your accountant can look at the acquisition and financing numbers to help you determine if it’s a good move for your cash flow.

With input from you and other critical team members, they can also recommend whether it’s best to switch to a new machine or hang on to the one that you already have, even if it’s less efficient on paper.

3. Managing Invoices

The quicker those invoices get paid, the healthier your cash flow. This is not necessarily an issue for retail businesses, where real cash is immediately exchanged during transactions. However, any business that relies on offering credit will need to actively manage its receivables in order to keep its cash flow healthy.

Your accountant can ensure that invoices are sent promptly and that any receivables are followed up on. Better yet, they can devise optimisations that minimise losses from invoicing errors.

analysing invoices

4. Credit Management

Dealing with overdue payments can feel like waiting for a wave when surfing—unpredictable and frustrating. Your accountant can help you establish clear credit policies and monitor customer payment behaviour. With their guidance, you can minimise late payments and keep your cash flow riding high.

5. Inventory Management

“Inventory is cash” is a common saying in retail. While not literally true, it makes sense that unsold stock sitting in your warehouse represents a big problem for your cash flow. Your accountant can help you analyse your inventory turnover rates then help you ensure that you're not tying up too much cash in stock. Proper optimisation will mean that you'll have just enough to meet demand without getting bogged down.

6. Timing Expenses

As your business grows, its list of billers is probably going to grow along with it. Even if you do have cash on hand, though, it’s not always a good idea to pay all your bills before they’re due since you might need the cash to cover other incoming expenses. An accountant should help you make sense of the best times to pay off your bills so that you’re never caught short of cash.

holding credit card

7. Tax Planning

Smaller businesses are more likely to overpay compared to larger organisations, mostly because smaller businesses don’t always have accountants to process their taxes. An accountant should be able to find cost-efficient but completely legal avenues to navigate your business’s taxes, keeping it compliant while increasing its available cash at the same time.

Accountants Can Optimise Cash Flow for Any Business

General cash flow patterns do change depending on what your business is. For instance, while a restaurant in a busy urban area can expect relatively stable income all year round with boosts during holidays, a small farm will usually only have positive income during harvest time and negative outflows the rest of the year.

Regardless, it’s always going to be in your best interest to secure as steady a cash flow as possible within your line of business. Whatever path you do take, having a qualified accountant by your side should help you make the most out of whatever cash comes into your business. Contact us at Target Accounting for accounting services and solutions that will improve your cash flow and, in turn, your prospects for profitability.


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