Posted on 24 May, 2018 in ATO, Advice, Cash Flow, Employers, Small Business, Tax, Tips

Cash flow or Cash? No.

Cash flow is the life blood of small business! And yet, as soon as we receive that big customer payment we suddenly all become magicians...one moment it’s there and the next, whoosh it’s gone!

I have recently found that my clients experience cash flow stress both ends of the spectrum. No cash? #@&% how am I going to pay wages?... Cash? #@&%, I have to pay how much tax?! It seems we are continually stuck between the issue of; sucks when you have it, sucks when you don’t. So how do you find a happy balance?

For those of us who struggle with the ‘no cash’ scenario, the first thing you need to do is arrest that cash! Not $1 gets spent without a fully justifiable reason. Stop with the $50 here and there, stop drawing cash out of your business for personal reasons. Put your “Big Boy” pants on and hold yourself accountable for every precious dollar.

You are your own boss, brilliant; but this means you have to set your own strict rules and essentially call yourself into that proverbial office for the dreaded ‘serious’ chat if things aren’t looking great. This is really difficult for some, the concept of being accountable solely to yourself is hard. There are some great tools out there to help you, but the reality is, if you can’t manage your cash flow and this is a recurring issue, seriously consider the practical benefits of being an employee. There is no shame in calling it quits and opting for a stress free option, your health is more important.

For those rolling in it but have the dreaded tax man looking over their shoulder, there are several tax planning strategies which can be implemented to help reduce your tax liability. The trick is to maintain up-to-date books and have regular contact with your tax professional. You need to be proactive when it comes to managing income tax estimates. Be sure to understand the numbers and start the conversations with your tax professional early.

According to national business insights, only 56% of small business were cash flow positive at the end of January. Considering small business is Australia’s biggest employer, I’d say the current insights are worrying and more needs to be done by our government to reduce the tax and compliance pressure on small business.

That said, your awareness and understanding of cash flow is crucial. When we start our businesses we walk into a world of numbers, balancing books, and tax. This is not everyone’s passion and so the concept of cash flow is something we put back-of-mind. In my experience this is detrimental to business, yes, the odds may feel against you but YOU can change this. In business we must strive to put one foot in front of the other, recognise our weaknesses and instead of ignoring them, take stock, speak to professionals and work out the next steps. I’ve seen people struggle but I’ve also seen them turn it around to succeed. I know you can too.

Kath xx