Cash is king. Cash flow is ace!

Cash is King but Cash Flow is Ace!

November 29, 2017 | By Luke McNiece, Kensington Partners & Business Advisers

Most business owners are probably familiar with the old saying that "turnover is for vanity, profit is for sanity and cash is king". In the current economic environment in WA, however, it's maximising cash flow that is the ace in the hand of every Perth business owner.

In our Kensington Partners consultations with clients, it's obvious that some have allowed complacency to creep in during the economic good times and are now facing cash flow issues in their businesses and, as a result, personally.

At Kensington Partners, we are passionate about helping our Perth clients manage their risk and build sustainable and profitable businesses. Therefore, our advice on cash flow is:

Understand your breakeven point

Your breakeven is the point at which the level of sales covers all expenses and the business is making neither a profit or a loss. Many business owners don't know their breakeven sales and are making uninformed decisions as a result.

Have a cash flow plan and update it regularly

A 12-week cash flow plan detailing your starting cash balance and your projected cash inflows and outflows will let you plan for the peaks and troughs in your cash and identify the need for additional funding. It doesn't have to be complex but we recommend every business has one.

Know what you are good at and ask for help early

Many Perth business owners are daunted by the thought of developing a cash flow plan, ignore the warning signs in their businesses and come to us too late for us to help. If you don't have the resources in house to implement the breakeven analysis and cash flow plan, talk to an adviser who can help and do it before you reach a cash flow crisis point.

If you'd like a no obligation discussion with an adviser who can help you manage your business cash flow, contact me, Luke McNiece at Kensington Partners on 9427 1700 or luke@kensingtonpartners.com.au.

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