Cash Is King!

Our clients often ask us for help with managing their cashflow. A statement of cashflow is one of the three key financial statements that tracks all the money flowing in and out of your business.

 

Cashflow Statements

The cashflow statement acts as a bridge between the income statement and balance sheet by showing how money moved in and out of the business.

There are three sections to a cash flow statement:

  • Cash Flow from Operating Activities – this is cash earned or spent in the course of regular business activity—the main way your business makes money, by selling products or services.
  • Cash Flow from Investing Activities – this is cash earned or spent from investments your company makes, such as purchasing equipment or investing in other companies.
  • Cash Flow from Financing Activities – this is cash earned or spent in the course of financing your company with loans, or equity injections.

 

Analysing Your Cashflow

We can analyse your cashflow statement to retrospectively find payment cycles or seasonal trends when you need additional cash for payments. This can help you plan ahead and make sure you always have money to cover payments.

We can also identify if your business is in a position to invest in capital, pay down debt, or increase the dividend. This can help you decide if you actually have the money to spend now or if the cash showing is actually needed to fund your business over the next period ahead.

 

How to Improve Cashflow

There are some simple steps you can take to help improve your cashflow and the cash you have available in your business to cover operating expenses or planned investments, including:

  • Review your debtor collection policy by ensuring you have a strong policy in place for collecting debts.
  • Push creditor payments out until they are due -paying just before the due date maintains cash flow without missing out on early payment discounts.

 

Xero Cashflow Statements

You can monitor your cashflow at any time by selecting the Cashflow Statement in the Reports suite of your Xero account.

If you require a cashflow forecast, Rural Accountants can assist by creating one using the Spotlight reporting tool.

Remember: Cash is King!

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