The answer is simple and the following is just a brief outline of what a reputable can and should be providing for your business.
With the global financial crisis still fresh in everyone’s mind it is time to consider if you have the best information at hand to make informed business decisions. When the crisis hit a lot of small businesses suffered and were forced into closure. The statistics show that for the September quarter in 2008 over 4000 firms failed, the September quarter for 2010 shows nationally administrations in total across Australia were 8561, the largest portion on this was bankruptcies at 6260. The statistics of failed business can be quite alarming when you consider these are ongoing and increasing in number.
What does all this mean for your business? A large number of businesses fail for two reasons firstly they don’t collect their debts when due and secondly a poor cash flow.
Cash is a vital resource in any business and without a good cash flow plan the business will struggle to meet its obligations resulting in possible closure. Monitoring your cash flow on a weekly basis will highlight areas of concern before they arise.
A healthy cash flow can be achieved through the use of a number of tools.
- Providing regular cash flow reports.
- Reviewing the Aged Receivables report (Debtors, people who owe you money).
- Reviewing the Aged Payables report (Creditors, people who you owe money).
The cash flow report should also take into consideration other cash expenditure for example Payroll, Superannuation, GST, leases, bank loans and all other liabilities of the business. Timing of the inflows and outflows of cash is also an important part of the cash flow plan to ensure that you do not have all your liabilities arising at once.
Your bookkeeper should also follow up your debts with the niceties such as telephone calls and letters and ensure that your invoices and statements are sent out on a regular basis. It is outside the scope of a bookkeeper to provide legal advice.
It is not a good practice for the business owner to chase their own debts as it creates a difficult situation between the owner and the clients. The role of the business owner is to build and maintain a good working relationship with their client.
The Aged Receivable and Aged Payable should be reviewed on a weekly basis along with the cash flow report and the bank reconciliations to ensure the business owner has sufficient information to make decisions on future growth, current and future obligations and to correct any issues that may arise that will have a negative impact on your business.
Utilising a bookkeeper to process and prepare your financial information on a regular basis saves the business considerable time ensuring decisions are based on current data in accordance with all relevant changes to legislation.
Before you decided to hire an external bookkeeper make certain they have the required qualifications and experience to undertake this role. More information on these requirements can be found on the National Institute of Accountants or the Australian Taxation office websites.
For a free consultation to discuss your business needs go to our website for more information and contact details at www.aprbookkeeping.com.