Podcast Key Note
So this is definitely a tough topic to cover, again
Disclaimer I am definitely not an expert. I am trying to figure things out and even with my accounting background sometimes these concepts still hits like a head on collision with a bus.
My hope is to have you think through this and hopefully do a lot more research, as this topic is very very important for you not to be on top of your CASH FLOW
Welcome to the Show.
Cash flow is something I wouldn’t say I struggled with but I’m always conscious of. Previously, I spoke on income statement and inventory control. Generally, I like to have an idea of my business cash flow and I feel it’s good I discuss it here.
I look at cash flow as cash coming in versus cash going out.
Let’s take a look at it from a point of view where your cash balance is 2 million. Then your generator goes bad and you have to buy a new one for 1.5 million bear in mind your rent is due in 3 months; so that’s going to be a cash flow problem. You just spent 1.5m out of the 2m you have and maybe you’ve been planning to use 1m for rent and now you are down to 500k and obviously you have pending expenses such as salaries, general maintenance etc in your restaurant.
It’s recommended to have your cash flow statement for 8-12 weeks in advance so you are sure you have enough money to cover most expenses and some unforeseen one(s) in the next 3-4 months.
What I do in my business for the most part; we understand what our expenses on monthly bases are and we are in a position where general sales can cover most expenses. So we don’t have to go back to using – let’s call it our cash reserve – eg. lets say i am trying to buy like bike I will try to squeeze money out of that months’ sales to buy the bike. So I’m not going to bank balance to remove money which means that your cash balance in the bank should actually be growing.
- Listen to the Podcast
Key Takeaway Points:
- Do analysis of your Cash flow St. because it’s the lifeblood of your business
- Basically Cash flow in business is the cash coming in versus cash going out
- It is recommended to have 3-4 months Cash Flow St. done
- Does your general sales covers your monthly expenses?
- Pay yourself First- Is your salary enough? Remember a business that can’t pay you a decent salary is struggling
- Accrue your expenses, Put money aside for known future payments
- Watch your inventory levels, avoid over purchasing